belgacom RAPPORT D ACTIVITÉS 2013

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1 belgacom RAPPORT D ACTIVITÉS 2013

2 NOUS SOMMES......une société de télécommunication active sur le marché belge et international. La qualité de nos réseaux fixes et mobiles interconnectés fait de nous le premier fournisseur en Belgique de services de téléphonie, d internet et de télévision. Elle nous permet également d offrir partout et en permanence l accès aux données digitales et aux meilleurs contenus multimédia. Nous développons aussi des solutions pour réduire nos émissions de CO 2, soutenir les communautés les plus vulnérables et favoriser l accès pour tous au monde digital. C est ainsi que nous contribuons au développement économique, social et environnemental de la société dans laquelle nous sommes enracinés. 22 Créer de la valeur et la partager 20 La simplification au service du client >> Découvrez la version web de ce rapport annuel sur

3 GLOSSAIRE 3G Réseau mobile de troisième génération (UMTS - Universal Mobile Telecommunications System) permettant la transmission vocale et la transmission de données à plus haut débit 4G Réseau mobile de quatrième génération, permettant la transmission de données à très haut débit. ARPU de Belgacom TV Comprend uniquement les revenus provenant des clients et tient compte des promotions, divisés par le nombre de ménages abonnés à Belgacom TV ARPU de la voix fixe Revenus totaux générés par le trafic vocal, à l exclusion des revenus issus des activations et du trafic des téléphones publics, divisés par le nombre moyen de canaux d accès vocal pour la période considérée et par le nombre de mois pendant cette même période ARPU mensuel net Représente le total des revenus générés par le trafic vocal mobile et le trafic de données mobiles, divisé par le nombre moyen de clients actifs pendant cette période. L ARPU est calculé sur la base des moyennes mensuelles pour la période indiquée. CBU La Consumer Business Unit (CBU) prend en charge nos clients résidentiels Clients mobiles actifs Inclut la voix et les cartes data. Les clients actifs sont les clients qui ont établi ou reçu au moins un appel ou envoyé ou reçu au moins un SMS au cours des trois derniers mois. Les clients prepaid et les clients de MVNO relèvent totalement du segment de clients CBU Cloud computing Le terme «computing» fait référence à la technologie qui permet de mieux gérer les informations, le terme «cloud» faisant pour sa part référence au stockage des données sur internet. Les systèmes informatiques qui devaient autrefois être installés au sein de l entreprise fonctionnent à présent de l extérieur, dans des centres de données externes. En d autres termes, les entreprises utilisent les services disponibles sur ces systèmes informatiques sans avoir à se soucier de la maintenance de l équipement CWS Carrier and Wholesale Technologies DAS Débit d absorption spécifique : unité de mesure de la quantité d énergie électromagnétique absorbée par le corps humain lors de l utilisation d un GSM. Le DAS maximum autorisé en Europe est de 2 W/kg conformément aux directives de l ICNIRP DSL Le DSL (Digital Subscriber Line ou ligne d abonné numérique) est une famille de technologies permettant la transmission de données numériques par les lignes d un réseau téléphonique local Dual Carrier option 3G qui double la vitesse de téléchargement des appareils compatibles à une vitesse maximale théorique de 42 Mbps en combinant les données transmises sur deux fréquences. EBITDA Earnings Before Interest, Taxes, Depreciation and Amortization (Bénéfice avant intérêts, impôts et amortissements) EBU L Enterprise Business Unit (EBU) FSC Forest Stewardship Council : ONG internationale et système de certification fournissant une normalisation internationale, un gage de qualité via son label et des services d accréditation aux entreprises, organisations et communautés intéressées par une sylviculture responsable. Le label FSC établit un lien crédible entre la production et la consommation responsables de produits forestiers, permettant aux consommateurs et entreprises de prendre des décisions d achat profitables aux individus, à l environnement et créant une valeur commerciale permanente HD Haute Définition HDTV High Definition Television : la télévision à haute définition HR Human Resources : ressources humaines IBPT Institut Belge des Services Postaux et des Télécommunications ICT Information and Communication Technologies IDTV Interactive Digital Television : télévision digitale interactive Réseau IP Un réseau IP est un réseau informatique composé d appareils supportant l IP (Internet Protocol) IPTV La télévision en protocole internet est un système fournissant le service de télévision numérique via l architecture et les méthodes de réseau de la suite de protocole internet via une infrastructure réseau commutée par paquets ISO Norme de gestion de la sécurité : l objectif fondamental de la norme consiste en l élaboration et la conservation d un système de gestion efficace de l information, basé sur une approche d amélioration permanente IT Information Technology : technologie de l information LAN Local Area Network LTE Long Term Evolution M2M Machine-to-Machine MoU (Minutes of Use) Durée de l ensemble des appels émis au départ ou à destination du réseau de Proximus, par client vocal actif et par mois MTN MTN Group Limited est un groupe multinational de télécommunications, actif dans 21 pays d Afrique et du Moyen-Orient MTR Mobile Termination Rate : tarifs de terminaison mobile NFC Near Field Communication ONG Organisation non gouvernementale. Entité juridique, non gouvernementale créée par des personnes physiques ou morales ne participant à aucun gouvernement et n étant pas représentés dans ceux-ci OSU Obligation de service universel PME Petites et moyennes entreprises PUE Power Usage Effectiveness est un paramètre de mesure servant à déterminer l efficacité énergétique d un centre de données. La valeur PUE est obtenue en divisant la quantité d énergie alimentant un centre de données par la quantité d énergie requise pour le fonctionnement de son infrastructure informatique. Il s agit donc d un rapport dont le quotient indique une augmentation de l efficacité globale à mesure qu il se rapproche de 1 RSE Responsabilité Sociétale d Entreprise Staff and Support (S&S) Regroupe l ensemble des fonctions horizontales soutenant les activités du Groupe SDE&W Service Delivery Engine & Wholesale combine les services réseau et IT et propose des services aux autres opérateurs et fournisseurs SIP Session Initiation Protocol : protocole d initiation de session Taux de désengagement mobile Nombre total de cartes SIM désactivées du réseau Proximus (augmenté du nombre total de port-outs dus à la portabilité du numéro mobile) pendant la période considérée, divisé par le nombre moyen de clients au cours de cette même période VDSL & VDSL2 Very High Rate Digital Subscriber Line est une technologie d accès à très haut débit qui exploite l infrastructure de fils de cuivre existante. VDSL2 est le successeur du VDSL VOD Video On Demand : vidéo à la demande VoIP Voice over Internet Protocol WAN Wide Area Network Wi-Fi Réseau local sans fil

4 SOMMAIRE 10 Trouver le bon équilibre dans un marché saturé 14 Parés pour la croissance Des contenus à voir, à vivre et à partager, partout et tout le temps Nos réseaux sont l ossature des nouveaux services 38 Une expérience unique pour chaque client résidentiel SOMMAIRE 1 BELGACOM RAPPORT D ACTIVITÉS 2013 Une organisation toujours plus agile Interview du Président du Conseil d Administration 04 Interview de l Administrateur délégué 06 Faits marquants Une expertise appréciée à l international 42 Un partenaire unique pour nos clients professionnels 08 Chiffres clés Contexte opérationnel 14 Stratégie 20 Simplification 22 Contribution 26 Réseaux 30 Ressources humaines 34 People focus 38 Clients 48 Finance 50 Action 54 Gouvernance

5 UNE RESPONSABILITÉ COLLECTIVE BELGACOM RAPPORT D ACTIVITÉS 2013 INTERVIEW 2 Belgacom n est pas seulement un moteur de croissance économique, mais également un vecteur de progrès pour la société belge dans son ensemble. Les différentes parties prenantes de l entreprise ont à son égard des attentes légitimes qu il importe de traduire en vision d avenir durable et en stratégie porteuse de croissance. Pour Stefaan De Clerck, Président du Conseil d Administration, la responsabilité collective de l entreprise et les intérêts de ses actionnaires vont de pair. Entretien sur les changements récents et sur les défis à venir. Vous êtes Président du Conseil d Administration de Belgacom depuis septembre Bien des choses ont changé en quelques mois... Belgacom traverse effectivement une période de grands changements. L évolution technologique du secteur des télécoms ne cesse de s accélérer, tant pour les solutions mobiles que pour les solutions fixes. Pour pouvoir proposer à nos clients la plus haute qualité et les produits les plus innovants, nous devons mettre la barre toujours plus haut. Il est absolument indispensable de nous développer en permanence. Telle est dès lors l une des priorités de notre nouvel Administrateur Délégué, désigné début La composition du Conseil d Administration a été revue elle aussi. Les femmes y sont désormais solidement représentées. Ce renouvellement favorise d emblée une dynamique favorable à la bonne gouvernance de notre entreprise. Tous les éléments sont au rendez-vous pour permettre à Belgacom d élaborer une nouvelle vision à long terme et d entamer une nouvelle décennie couronnée de succès. Des mois et des années passionnantes nous attendent, notamment à l échelle européenne et internationale. Il s agit à présent de poser de nouveaux jalons. Pourquoi est-ce une période à ce point cruciale? «TOUS LES ÉLÉMENTS SONT EN PLACE POUR DIX NOUVELLES ANNÉES DE RÉUSSITE.» Dans un marché hyperdynamique où l innovation est reine, le défi consistera pour Belgacom à ménager un équilibre judicieux entre investissements et économies. D une part, Belgacom ne peut se permettre de transiger sur les investissements nécessaires pour préparer l avenir et d autre part, l environnement concurrentiel nous contraint à rationaliser autant que possible notre mode de fonctionnement. Voilà qui exige une simplification des processus, des produits et des services qui devrait être également bénéfique, au final, à notre clientèle. Comment les différentes parties prenantes peuvent-elles favoriser cette transition? Je suis un fervent défenseur du dialogue. Belgacom a démontré en interne son aptitude à faire coïncider concertation et efficacité dans ses interactions avec le personnel. Depuis de nombreuses années déjà, il règne dans l entreprise un climat de paix sociale remarquable, en dépit d une conjoncture difficile. Nous espérons que cette culture de consensus continuera à porter ses fruits en 2014.

6 STEFAAN DE CLERCK PRÉSIDENT DU CONSEIL D ADMINISTRATION DE BELGACOM «BELGACOM A DÉMONTRÉ QU ELLE SAVAIT FAIRE RIMER CONCERTATION ET EFFICACITÉ.» INTERVIEW 3 BELGACOM RAPPORT D ACTIVITÉS 2013 Le même raisonnement s applique aux actionnaires, majoritaire comme minoritaires. Il s agira en particulier d instaurer, dans les mois à venir, un climat positif de concertation avec le nouveau gouvernement. Nous entendons aussi être à l écoute des actionnaires minoritaires. Chacun doit soutenir à son niveau les investissements à long terme. Toute notre stratégie doit pouvoir s appuyer sur une base solide et aussi large que possible. Les actionnaires peuvent certainement aider à bien saisir l importance de Belgacom dans les prochaines années, non seulement comme levier de croissance économique et d innovation, mais aussi comme facilitateur de progrès sociétaux, par exemple en matière de services au citoyen, de soins de santé ou d enseignement. Une telle démarche n est possible que si l entreprise reste concurrentielle et parvient à renouer avec une croissance durable. L actionnaire public est-il un gage de stabilité? Il est extrêmement important que les pouvoirs publics s attachent à rendre l infrastructure de télécommunications et les divers services associés accessibles à tous, citoyens et entreprises confondus. Il s agit d une responsabilité collective. Chaque entreprise, de la start-up à la multinationale, doit pouvoir compter sur une infrastructure optimale pour développer ses activités. Il est donc essentiel, pour favoriser l économie dans son ensemble, d investir dans l infrastructure télécom. À cet égard, l actionnaire public doit créer un cadre apte à permettre ces investissements et faire en sorte que ceux-ci se traduisent effectivement dans les faits. Quel regard portez-vous aujourd hui sur l entreprise? Il faut vivre cette entreprise de l intérieur pour percevoir réellement l intensité et la qualité de ses performances, dans le contexte d un secteur technologique et d une réglementation en évolution rapide. Cette entreprise doit avoir en permanence une vue à 360 sur un environnement concurrentiel aussi vaste que fluctuant. En dépit de la crise et des grandes mutations, Belgacom parvient à conserver une santé et un dynamisme remarquables, grâce à des collaborateurs très compétents, à une attention soutenue pour le consommateur et à d importants investissements à long terme. Ce sont nos atouts pour l avenir.

7 BELGACOM RAPPORT D ACTIVITÉS 2013 INTERVIEW 4 BÂTIR SUR NOS FORCES POUR GÉNÉRER UNE CROISSANCE DURABLE Belgacom dispose des atouts pour retrouver la croissance sur un marché en mutation permanente. Notre vision repose sur la combinaison d une connectivité performante, de solutions adaptées et de contenus attractifs. Nous faisons un métier indispensable. En donnant vie aux écrans, nous améliorons celle des consommateurs et des entreprises. Aujourd hui, c est une évidence, mais il faut quand même collaborateurs pour qu elle puisse chaque jour se réaliser. DOMINIQUE LEROY ADMINISTRATEUR DÉLÉGUÉ DE BELGACOM Quel est le principal défi pour Belgacom? Nous sommes actifs sur un marché de plus en plus concurrentiel. Nous assistons certes à une multiplication des écrans, avec un véritable boom des ventes de smartphones et tablettes, mais le nombre global de clients n augmente plus. Notre défi consiste donc à accroître les revenus par client en proposant des services innovants. Nous disposons de solides atouts pour sortir gagnants de cette période charnière. Quels sont ces atouts? Nos investissements importants dans la 3G, la 4G, la vectorisation ou la boucle optique locale («Fiber to the Home») nous donnent une avance technologique dans les réseaux fixes et mobiles. Nous sommes également à la pointe en matière de télévision numérique. Nous avons développé une offre très large de contenus et l améliorons sans cesse. Nous offrons l accès à ces contenus sur tous les écrans, n importe où et n importe

8 quand. N oublions pas non plus que nous sommes le seul opérateur national capable de fournir des solutions intégrées aux entreprises présentes dans les différentes régions du pays. Nous leur facilitons le travail grâce à de nombreux services innovants et une interconnectivité intelligente, en ligne avec leurs besoins spécifiques. Nous disposons d une taille critique et d une base financière solide que d autres opérateurs n ont pas, ou plus. Mais notre atout essentiel reste les compétences et la motivation de collaborateurs. Quels seront les nouveaux vecteurs de croissance? Les consommateurs comme les entreprises demandent des solutions qui leur facilitent la vie au quotidien. Ils veulent utiliser leurs différents écrans pour se divertir, pour partager des émotions ou pour travailler plus intelligemment. La convergence de nos réseaux fixes et mobiles donne vie à tous ces écrans. Nous sommes encore loin d avoir exploité tout le potentiel en matière de contenus, d applications et de divertissements. La sécurité est un autre domaine où les besoins sont exponentiels, tant dans la sphère privée (protection des données privées) que professionnelle (sécurité informatique, protection contre les cyber-attaques, etc.). Le cloud computing est également un formidable moteur de simplicité et de confort. Il sera de plus en plus facile de partager des documents, vidéos et photos stockés en toute sécurité dans un espace universel et de les visualiser sur divers écrans, dont le téléviseur clients de Belgacom testent déjà ce service. Quelles ont été, en 2013, les innovations qui répondent à ces nouveaux besoins? Nous avons encore amélioré la qualité et la rapidité de nos réseaux. Dans le domaine mobile en particulier, nous avons renforcé la 3G et étendu la couverture 4G. La 4G est comparable à une formidable autoroute, mais qui n a pas d intérêt si vous n avez pas de voiture performante pour l utiliser. Ce sont les contenus et les applications qui valorisent pleinement le haut débit mobile. Les perspectives sont prometteuses. Dans le domaine des soins de santé par exemple, nous avons testé un système de communication 4G embarqué dans une ambulance. Nous avons par ailleurs lancé des applications innovantes dans le domaine de la télévision numérique avec TV Replay ou des paiements mobiles avec Sixdots, le futur standard belge. Enfin, le succès de nos offres «tout compris», tant pour les consommateurs que les entreprises, confirme que notre stratégie de convergence est la bonne. Comment ces priorités se traduisent-elles en interne? Nous avons mis sur pied des programmes d accompagnement de nos collaborateurs vers une culture de la performance. Il s agit de mieux travailler ensemble pour que l efficacité soit au cœur de chacun de nos processus. Cette collaboration optimale rejaillit sur la satisfaction de nos clients et doit être une source de fierté pour chacun de nos collaborateurs. Le Président, dans les pages précédentes, évoque la «responsabilité collective» de Belgacom. Quelle est votre vision du rôle sociétal de l entreprise? Belgacom joue effectivement un rôle sociétal important. Cette responsabilité fait partie de notre culture. Les valeurs éthiques ne se décrètent pas, mais elles se traduisent concrètement par des actions dans lesquelles on croit. Dans notre cas, il nous paraît normal de contribuer au développement de la société dans des domaines proches de nos métiers, par exemple la lutte contre la fracture numérique, les solutions écologiquement performantes, la sensibilisation à la cyber-sécurité. Nous restons par ailleurs un sponsor important des mondes culturel et sportif. Pour Belgacom, que signifie la croissance durable? Une entreprise qui ne croît pas n a pas de futur. Belgacom est une société solide qui veut renouer avec la croissance. Pour être durable, cette croissance implique un juste équilibre entre investissements et rémunération des actionnaires, sans oublier son rôle sociétal. INTERVIEW 5 BELGACOM RAPPORT D ACTIVITÉS 2013 Quelles sont vos priorités pour les mois à venir? Nous allons encore simplifier nos structures et réduire nos coûts de fonctionnement, afin de pouvoir continuer à investir pour répondre aux demandes des clients. Notre image de marque et la satisfaction de nos clients sont des points d attention permanents. En conjuguant nos forces, nous pouvons regagner des parts de marché, particulièrement au nord du pays. Par ailleurs, la commercialisation prévue pour fin 2014 de tous nos produits sous la marque Proximus est une étape importante vers plus de clarté dans notre offre et notre communication. Elle doit être synonyme d un meilleur service à la clientèle et d une marque proche et à l écoute de ses utilisateurs. «LES GENS VEULENT UTILISER LEURS DIFFÉRENTS ÉCRANS POUR SE DIVERTIR, PARTAGER DES ÉMOTIONS OU TRAVAILLER PLUS INTELLIGEMMENT. NOUS LEUR APPORTONS LA CONNECTIVITÉ ET LES CONTENUS QUI DONNENT VIE À TOUS CES ÉCRANS.»

9 FAITS MARQUANTS 2013 LA SIMPLIFICATION DE NOS RÉSEAUX Notre programme de simplification de nos réseaux a atteint sa vitesse de croisière. Nous avons migré plus de lignes analogiques vers de nouvelles technologies, en toute transparence pour le client. BELGACOM RAPPORT D ACTIVITÉS 2013 FAITS MARQUANTS UNE NOUVELLE EXPÉRIENCE TÉLÉVISUELLE Les équipes de Belgacom en charge des services de divertissement ont développé une nouvelle façon de vivre la télévision grâce à TV Replay. Ce nouveau service permet au téléspectateur de rejouer en différé tout programme TV diffusé dans les 36 heures passées. LE PREMIER OPERATEUR 4G Le rythme de déploiement soutenu de la 4G nous a permis d atteindre un taux de couverture de 50% fin Cette technologie permet d accéder à l internet mobile à haut débit. DES POINTS DE VENTE À L ÉNERGIE VERTE En 2013, nous avons attribué à Eneco le contrat de fourniture d électricité pour nos Belgacom Centers. Nos points de vente sont désormais alimentés en énergie éolienne 100 % renouvelable, produite en Belgique. L OFFENSIVE MOBILE Sur le marché résidentiel, nous avons réussi à reconquérir des clients et à les fidéliser autant pour les clients mobiles que pour les clients convergents. Sur le marché des PME, nous avons consolidé notre leadership, en réduisant les départs de clients à des niveaux antérieurs à la guerre des prix. Nous avons même regagné des parts de marché!

10 DES LIENS RENFORCÉS AVEC BNP PARIBAS FORTIS Nous avons reconquis BNP Paribas Fortis pour la téléphonie mobile et renforcé nos liens avec le leader bancaire en décrochant divers contrats. Nous avons également lancé ensemble une coentreprise pour SixDots, le futur standard belge de paiement mobile. UNE PREMIÈRE INTERNATIONALE POUR BICS Notre filiale de «carrier» internationale BICS a enregistré une forte croissance de son trafic voix sur un marché en déclin. Nous avons pour la première fois réalisé une connexion 4G (LTE) en roaming entre l Europe, l Asie, l Amérique du Nord et l Afrique. SCARLET, LA RÉFÉRENCE LOW COST Scarlet se positionne de plus en plus comme la référence du low cost en matière de télécommunications, avec une offre attractive pour les consommateurs sensibles aux prix. Après avoir revu complètement ses offres mobiles, Scarlet a lancé une offre combinée internet + TV + téléphonie fixe. UN CONTRAT HISTORIQUE POUR TELINDUS LUXEMBOURG Telindus Luxembourg a terminé 2013 en signant le plus gros contrat de toute son histoire. En partenariat avec IBM en tant que sous-traitant pour les infrastructures de télécommunication et de stockage, Telindus Luxembourg devient un fournisseur stratégique de Innovative Solutions for Finance (IS4F), anciennement une filiale de Dexia Group. TANGO ENTRE DANS UNE NOUVELLE ÈRE Tango entre à grand pas dans l ère de l entertainment, en développant des offres inédites (sport, jeux, musique) au cœur desquelles le divertissement prend une place de plus en plus importante. FLEX, UNE NOUVELLE FAÇON DE TRAVAILLER Nous avons mis en pratique un programme d organisation du travail plus flexible, baptisé Flex, qui nous permet de travailler de façon plus souple et plus indépendante de notre environnement professionnel. Nous pouvons ensemble faire la différence, dans un esprit de confiance et de responsabilisation. FAITS MARQUANTS BELGACOM RAPPORT D ACTIVITÉS 2013

11 CHIFFRES CLÉS ,318 milliards EUR CONSUMER BUSINESS UNIT 35% ENTERPRISE BUSINESS UNIT 34% SERVICE DELIVERY ENGINE & WHOLESALE 5% STAFF & SUPPORT 1% BELGACOM INTERNATIONAL CARRIER SERVICES 26% >> de revenus 21,55 EUR >> cours de l action au 31/12/2013 BELGACOM RAPPORT D ACTIVITÉS ÉVOLUTION DE NOS INVESTISSEMENTS (EN MILLIONS EUR) CHIFFRES CLÉS ,713 milliards EUR >> d EBITDA 27% >> de marge EBITDA 505 millions EUR >> de cash flow libre 2,18 EUR >> dividende brut par action pour l année 2013 sous réserve d approbation par l Assemblée générale des actionnaires Y compris 120 millions EUR pour l acquisition de la licence 800 Mhz >> collaborateurs

12 >> clients internet >> clients packs >> clients mobiles >> clients Belgacom TV MOBILE 99% >> de couverture 3G et 2G 50% >> de couverture 4G fin 2013 FIXE ± 89% >> de couverture VDSL2 93% >> de couverture TV CHIFFRES CLÉS BELGACOM RAPPORT D ACTIVITÉS 2013 WIFI ± >> hotspots en Belgique -63% >> émissions de CO enfants >> formés à l utilisation en toute sécurité d internet et aux nouveaux médias.

13 TROUVER LE BON ÉQUILIBRE DANS UN MARCHÉ SATURÉ Naviguer dans une conjoncture défavorable En 2013, les opérateurs ont dû composer avec une série de contraintes, en particulier réglementaires (voir focus p.12). Le climat économique général a également joué un rôle important. Même si la crise frappe moins durement la Belgique que d autres pays européens, la stagnation de l activité économique pèse sur le moral des ménages comme des entreprises, qui ont tendance à limiter leurs dépenses en général, et dans les télécoms en particulier. BELGACOM RAPPORT D ACTIVITÉS 2013 CONTEXTE OPÉRATIONNEL 10 Partout en Europe, les opérateurs télécoms ont dû faire face à un marché souvent proche de la saturation. Le tassement du marché de la voix, de l internet et même de la TV numérique ainsi que l érosion brutale des prix de la téléphonie mobile ont mis les marges sous pression. Le défi pour les opérateurs sera de compenser cette pression à la baisse par de nouvelles sources de revenus. Rationaliser pour les professionnels De nombreux clients professionnels ont engagé des programmes de réduction des coûts et préféré repousser certains investissements dans leurs infrastructures informatiques et télécoms. Dans un contexte de rationalisation, les entreprises et services publics sont à la recherche d un interlocuteur unique capable de fournir l ensemble des solutions informatiques et télécoms. Proposer une alternative low cost sur le marché résidentiel La crise s est également traduite par l émergence d une offre «low cost». Un nouvel acteur, Snow (BASE), a fait son entrée sur ce segment, avec une offre combinant téléphonie fixe, internet et télévision numérique de base à un prix agressif. La réponse de Belgacom ne s est pas fait attendre, via sa filiale Scarlet. Ces offres «low cost» ont par ailleurs dynamisé un segment de la TV numérique qui approche tout doucement du plafonnement en termes de nombre d abonnés. S adapter à l explosion du trafic de données Les opérateurs télécoms ont beaucoup investi dans leurs infrastructures ces dernières années, que ce soit dans l internet à haut débit, le wi-fi ou les réseaux mobiles de quatrième génération (4G) a vu par ailleurs se multiplier les appareils connectés et les applications tirant profit d une bande passante de plus en plus confortable. L utilisation intensive des réseaux sociaux, le cloud, le gaming et la visioconférence sont des exemples de nouveaux moteurs de croissance qui sont encore loin de tourner à plein régime. De nouveaux investissements s imposent à présent pour soutenir ce trafic de données. 111% >> Taux de pénétration mobile Source : Belgacom +72% >> Ventes de tablettes en 2013 Source : GFK. Monétiser les investissements dans les réseaux Les opérateurs télécoms européens doivent relever un double défi : compenser la baisse de revenus de la voix et du SMS par la valorisation des données mobiles, tout en évitant qu un ralentissement des investissements dans les réseaux ne dégrade l expérience du client. Or, on constate aujourd hui en Europe un déséquilibre entre les acteurs qui ont permis la généralisation du haut débit et de l internet mobile et ceux qui profitent de cette croissance : les acteurs dits «over-the-top» court-circuitent les réseaux télécoms classiques en proposant des services de communication ou de contenu sur internet, souvent gratuits, mais financés par la publicité, et qui profitent de la bande passante.

14 80% >> Taux de pénétration de la TV numérique Source : Belgacom +15% >> Évolution des ventes smartphones Source : GFK CONTEXTE OPÉRATIONNEL 11 BELGACOM RAPPORT D ACTIVITÉS 2013 FOCUS LE MARCHÉ BELGE ET SES SPÉCIFICITÉS RÉGIONALES >> Obéissant à des logiques et stratégies purement régionales, la pénétration des câblo-opérateurs, particulièrement importante en Belgique, influence fortement le paysage concurrentiel. Dans le nord du pays, le principal concurrent de Belgacom est le câblo-opérateur Telenet, dominant sur le marché fixe, tandis que dans le sud, où Belgacom est leader, VOO est le principal concurrent. Numéricable opère dans certaines communes de Bruxelles et dans une petite partie du Hainaut. En tant que seul opérateur «quadruple play» d envergure nationale, Belgacom a bien compris ces spécificités régionales. Depuis plusieurs années, sa stratégie de commercialisation tient compte des besoins différenciés selon les régions.

15 Profiter du momentum en Belgique Les progressions spectaculaires des ventes de smartphones (+15%) et de tablettes (+72%) en 2013 permettent à la Belgique de progressivement rattraper son retard sur les pays voisins en matière d internet mobile. Plus de 38% des téléphones mobiles sont désormais des smartphones et la consommation de données mobiles sur smartphones a plus que doublé entre 2012 et 2013, atteignant 250 Mo en moyenne. Or, l expérience mobile ne peut être satisfaisante sans connexions rapides et performantes. À cet égard, 2013 a vu l élargissement de la couverture 4G/LTE. Avec une couverture de 50% fin 2013, Belgacom conserve sa longueur d avance sur les deux autres opérateurs mobiles. Parallèlement, la couverture 3G ne cesse de s étendre. Belgacom était en tête fin 2013 avec un taux de 99,5% (source : CommSquare) et une amélioration de la capacité de son réseau 3G, permettant d atteindre des vitesses jusqu à 21 Mbits/s. ± >> Nombre de hotspots wi-fi en Belgique BELGACOM RAPPORT D ACTIVITÉS 2013 CONTEXTE OPÉRATIONNEL 12 FOCUS UN CADRE RÉGLEMENTAIRE QUI MET LA PRESSION SUR LES MARGES Les opérateurs télécoms ont dû intégrer à leurs stratégies trois mesures réglementaires majeures, aux niveaux belge et européen. >> Prolongation des effets de la «nouvelle loi télécom» Les modifications de la loi télécom entrées en vigueur en 2012, en particulier la possibilité offerte aux consommateurs et petites entreprises de changer plus facilement d opérateur en leur permettant de résilier leur contrat sans frais après six mois, ont continué de stimuler la volatilité du marché. La protection du consommateur reste un point d attention pour les autorités politiques et réglementaires belges et européennes, avec des initiatives visant à accroître la transparence des offres et des prix et à permettre aux clients de mieux contrôler leurs dépenses télécoms. >> Roaming Les prix du roaming ont à nouveau baissé en juillet 2013, conformément au troisième Règlement européen entré en vigueur à la mi En 2014, ce service restera sous la loupe des autorités européennes qui visent l émergence d un marché unique européen des communications électroniques et expriment l intention de supprimer à moyen terme les surcoûts liés au roaming. >> Ouverture du câble En 2013, les régulateurs belges ont adopté les décisions relatives aux offres de référence et prix de gros à appliquer par les câblo-opérateurs, permettant, d ici au 2 e trimestre 2014, la mise en œuvre effective des obligations qu ils avaient décidées en Jusqu à présent, seule Mobistar a exprimé un intérêt à utiliser la plateforme du câble pour proposer une offre fixe sur le marché. Le cadre réglementaire et législatif est abordé plus en détail dans le rapport financier.

16 Gagner l offensive du mobile S il ne fallait retenir qu un chiffre pour 2013, révélateur de la concurrence acharnée qui règne dans le domaine de la téléphonie mobile, ce serait sans doute la chute des prix des forfaits illimités pour les communications vocales et SMS mobiles. En à peine un an, ceux-ci sont passés de EUR par mois à EUR par mois. Cette «offensive du mobile» est la conséquence majeure de la «nouvelle loi télécom», entrée en vigueur en octobre 2012 et qui facilite le changement d opérateur (lire aussi focus p.12). Elle résulte également de l offensive simultanée sur les prix menée par les acteurs du câble. Cette lutte sur les prix intervient dans un contexte de marché quasiment saturé de la téléphonie mobile (111% au T4 2013), synonyme d un potentiel de croissance très faible. Ce bouleversement du marché mobile a engendré d une part le déclin du marché des cartes prépayées, dû à la plus grande attractivité des offres postpayées, et d autre part une augmentation de la volatilité des clients. Celle-ci s est toutefois tassée à partir du troisième trimestre Stabiliser le marché de la téléphonie fixe Les offres packagées «triple play» (ligne fixe, internet et TV numérique) et «quadruple play» (avec le mobile en plus), incluant des forfaits d appels fixes illimités attrayants, ont permis de stabiliser la pénétration de la téléphonie fixe. Le Belge reste très attaché à sa ligne fixe, dont il apprécie le confort et la qualité. Environ 7 ménages belges sur 10 possèdent toujours une ligne fixe. Le rythme de pénétration de la TV numérique ralentit logiquement, au fur et à mesure de l adoption de ces services par une large majorité de consommateurs. En plaçant le produit TV au cœur des offres «multiple play», Belgacom a consolidé une part de 32% sur le marché de la télévision numérique et de 27% sur le marché global de la TV à la fin Profiter des opportunités Des offres «convergentes» pour fidéliser les clients Pour fidéliser une clientèle devenue plus volatile, l ensemble des opérateurs utilisent la technique des ventes combinées. Comme le prouve le pourcentage grandissant des Packs dans les ventes globales, le consommateur a bien compris l intérêt de centraliser ses besoins de convergence (fixe et mobile, voix et données, POSITION CONCURRENTIELLE (PARTS DE MARCHÉ) BELGACOM 44% CABLE 50% AUTRE 6% BELGACOM 32% CABLE 64% AUTRE 4% BELGACOM 41% MOBISTAR 29% BASE 24% CABLE 6% INTERNET TÉLÉVISION MOBILE CONTEXTE OPÉRATIONNEL 13 BELGACOM RAPPORT D ACTIVITÉS % >> 25% des clients Belgacom disposant d un pack y ont également inclus le mobile Source : Belgacom 38% >> 38% des détenteurs de GSM ont un smartphone Source : étude de marché Belgacom, second semestre 2013 communications et contenus) auprès d un seul et même fournisseur. Depuis déjà 2007, Belgacom s est illustrée comme pionnière et leader de cette stratégie de convergence, à travers la vente de Packs, puis du lancement de services convergents tels que TV Partout. Des services différenciateurs dans le cloud Le cloud computing, à savoir l accès à des applications et services informatiques sur serveurs au moyen d un simple navigateur web et d une connexion haut débit, offre un énorme potentiel aux opérateurs télécoms. Du stockage grand public pour les photos de famille à la gestion de datacenters ultraperformants, en passant par la mise à disposition de solutions combinant connectivité et informatique à l intention des PME, chaque client y trouve son compte. Le cloud offre une opportunité unique aux opérateurs de se différencier en proposant de nouveaux services flexibles et sécurisés.

17 PARÉS POUR LA CROISSANCE BELGACOM RAPPORT D ACTIVITÉS 2013 STRATÉGIE 14 >> Dans un monde hyperconnecté, le consommateur doit pouvoir interagir via le terminal de son choix, où et quand il veut, sans se poser de questions sur la technologie utilisée.

18 Notre principal défi est de retrouver une croissance durable, en regagnant des parts de marché - comme nous l avons fait avec succès sur les abonnements mobiles fin et en valorisant encore mieux nos solutions de convergence auprès de nos clients. Pour ce faire, nous continuons d investir dans nos réseaux et nos plateformes pour qu ils puissent répondre aux besoins de demain. Parallèlement, nous accélérons notre transformation pour devenir une entreprise plus agile, qui fait la différence sur le marché. LA CONVERGENCE CHEZ BELGACOM >> LES 29 NOUVEAUX BELGACOM EXPERIENCE STORES PERMETTENT AUX CLIENTS DE MIEUX COMPRENDRE NOS PRODUITS. Construire sur nos atouts Belgacom possède des atouts indéniables sur lesquels elle peut s appuyer : ses réseaux, fixe et mobile, son avance dans le cloud computing et la télévision numérique, son réseau de distribution proche des clients, et surtout ses collaborateurs, dont l expertise et la capacité d adaptation lui permettent de gérer des conditions de marché difficiles. Les meilleurs réseaux convergents Belgacom mise plus que jamais sur sa stratégie de convergence pour assurer une croissance durable sur un marché complexe. Cette convergence étendue des réseaux, des contenus et des applications s est encore matérialisée en 2013 par une offre de services toujours mieux adaptée aux besoins de clients hyperconnectés et disponible sur de nombreux écrans complémentaires. STRATÉGIE 15 BELGACOM RAPPORT D ACTIVITÉS 2013 PACKS RISTOURNE N IMPORTE OÙ SERVICE DISPONIBLE À PARTIR DE N IMPORTE QUEL RÉSEAU, SANS INTERRUPTION ET SUR N IMPORTE QUEL APPAREIL CONNECTÉ Des employés talentueux Belgacom peut compter sur la motivation et la contribution de ses employés. Nous sommes un employeur de référence qui promeut l innovation et la mobilité et entend renforcer les talents dans les domaines du futur. N IMPORTE QUAND ACCÈS DE MANIÈRE NON LINÉAIRE À TOUT CONTENU PERSONNALISATION PROFIL ET PRÉFERENCES INDIVIDUELS SERVICE UN CONTACT - UNE BASE DE DONNÉE - UN SYSTÈME & PROCESSUS Notre propre cloud et notre expertise en cybersécurité Notre plateforme de cloud, gérée à partir de nos propres centres de données, garantit un niveau de sécurité optimal pour nos clients. De plus, Belgacom développe sa compétence en cybersécurité à la mesure des enjeux actuels. En ce domaine, elle est devenue une référence pour de nombreuses entreprises. Une plateforme de télévision numérique de pointe Belgacom est pionnière dans l offre de services de télévision numérique. C est la seule société en Belgique qui permet de regarder la télévision sur n importe quel appareil, sur le réseau fixe ou mobile, grâce au service TV Partout. C est aussi le premier opérateur à proposer TV Replay, qui permet de regarder un programme jusqu à 36 heures après sa diffusion. BELGACOM A TOUJOURS JOUÉ LE RÔLE DE PIONNIER DE LA CONVERGENCE ET ENTEND RESTER LEADER DES SERVICES CONVERGENTS EN DÉVELOPPANT NON SEULEMENT DES PACKS, MAIS AUSSI EN PERMETTANT AUX UTILISATEURS D AVOIR ACCÈS À LEURS CONTENUS, APPLICATIONS ET SERVICES DE PARTOUT, N IMPORTE QUAND ET DE MANIÈRE PERSONNALISÉE. Un réseau de distribution proche des clients Les clients résidentiels et professionnels ont aisément accès au personnel compétent de Belgacom. Ils ont à leur disposition un réseau de vente étendu composé des Belgacom Centers, des partenaires de vente indirecte, des centres d appels et des conseillers de clientèle pour les grands comptes.

19 gagne des parts de marché «rentables». Le cloud est en ce sens un vecteur de croissance important, tant pour les particuliers que les entreprises. Pour celles-ci, nous voulons être l interlocuteur privilégié unique pour les besoins télécoms et informatiques, avec une attention accrue sur la sécurité. >> COMME NOUS L AVONS FAIT POUR LA TÉLÉVISION NUMÉRIQUE OU LES RÉSEAUX 3G PUIS 4G, NOUS DEVONS ANTICIPER LES MIGRATIONS TECHNOLOGIQUES. La satisfaction du client repose sur son expérience globale visà-vis de nos marques. La richesse de nos produits et services convergents doit lui simplifier la vie et lui donner la liberté d interagir avec l appareil de son choix, où et quand il veut, comme il le souhaite et quel que soit le niveau de complexité technologique sous-jacent. BELGACOM RAPPORT D ACTIVITÉS 2013 STRATÉGIE 16 Consolider notre leadership Belgacom est le seul opérateur en Belgique à offrir tous ses services télécoms et IT à travers ses propres réseaux. Sur le mobile, nous continuons plus que jamais à investir dans l expérience 3G et le déploiement du 4G. Sur le réseau large bande, nous poursuivons le développement de technologies de pointe pour encore mieux anticiper les besoins croissants en trafic internet et améliorer le VDSL2. Notre ambition est d investir davantage dans nos réseaux, systèmes et services en rendant tout d abord nos réseaux fixe et mobile de plus en plus intelligents et flexibles. Compatibles entre eux grâce à la technologie IP, ils seront aussi capables de reconnaître l utilisateur et d adapter son accès aux services en fonction de son profil. Nos systèmes nous permettront ainsi de mieux personnaliser notre offre, mais aussi de développer plus vite et plus facilement de nouveaux services convergents. Ensuite, nous devons transformer Belgacom pour permettre à nos clients de nous contacter en toute simplicité, par des moyens de communications digitaux et interactifs. Rendre notre organisation plus efficace Belgacom est un fleuron du BEL 20 qui emploie plus de employés directs et plus de employés indirects. Durant les prochaines années, Belgacom doit se préparer à la mise à la retraite de plusieurs milliers d employés. Belgacom ambitionne de simplifier et optimiser les processus de travail afin de limiter les besoins de remplacement de ces collaborateurs. Cela nécessite de redéployer les compétences et l expertise afin de s adapter aux besoins futurs de la société. Cette transformation permettra de garder les coûts des ressources humaines constants au moins sur les 5 prochaines années. BELGACOM SE FOCALISE SUR QUATRE LEVIERS POUR DEVENIR PLUS AGILE ET RENOUER AVEC UNE CROISSANCE DURABLE Se transformer en profondeur pour regarder loin devant La saturation de nos marchés traditionnels nous impose de nous adapter et de nous concentrer davantage sur la réduction de nos coûts de fonctionnement. Il ne suffit plus d investir pour devenir plus rentable, il faut aussi travailler sur notre structure de coûts. Ces économies sont indispensables pour renforcer nos investissements dans nos réseaux et nos solutions, renouer avec une croissance à long terme et assurer à nos actionnaires une rémunération durable. Belgacom se focalise sur quatre leviers pour devenir plus agile et renouer avec une croissance durable Enrichir l expérience client Dans un secteur où le rythme des évolutions technologiques ne ralentit pas, Belgacom investit dans les services qui apportent une vraie valeur ajoutée aux consommateurs et aux entreprises, au travers de marques fortes et différenciées (Proximus et Scarlet). Il est non seulement essentiel d investir dans des innovations porteuses de croissance, mais aussi de les déployer au bon moment, auprès des clients appropriés, et de communiquer de la manière la plus efficace possible. C est ainsi que l on (re) INVESTIR SE TRANSFORMER CROÎTRE EXPÉRIENCE CLIENT SIMPLIFICATION CROISSANCE DURABLE CULTURE GOOD TO GOLD SERVICES CONVERGENTS ORGANISATION EFFICACE RÉSEAUX ET IT CONVERGENTS MARQUES FORTES

20 Simplifier à tous les niveaux La simplification est une priorité stratégique à tous les niveaux. Premièrement, Belgacom compte encore rationaliser dans une large mesure son portefeuille de produits et solutions. De plus, la migration d un certain nombre de systèmes vieillissants vers les nouvelles technologies IP lui a déjà permis, notamment en 2013, de préparer la simplification de ses réseaux. Nos systèmes informatiques internes font également l objet de programmes de rationalisation et d efficacité. La simplification permet de réduire les coûts et d améliorer l expérience client. En effet, une offre et des systèmes plus simples sont moins coûteux à gérer et garantissent au client une expérience de meilleure qualité. Se profiler au travers de marques différenciées À l heure de la convergence entre technologies fixes et mobiles, mais aussi entre télécoms et informatique, nos clients sont à la recherche d un partenaire unique, capable de leur fournir la totalité de ces services. Dans ce contexte, la fusion de nos deux marques commerciales Belgacom et Proximus en une seule apparaît comme une évolution naturelle, mieux en phase avec la réalité de nos offres et plus simple pour nos clients. Elle facilite en outre la gestion de nos systèmes internes et de notre offre de produits. Proximus, flambeau d une marque unique Dès la fin de l année 2014, la marque Proximus regroupera non seulement nos technologies et solutions mobiles, mais également toute notre expertise, acquise de longue date, en téléphonie fixe, ICT, internet et télévision numérique. Avec Proximus, nous optons pour une marque qui matérialise la proximité, celle des clients avec leur univers et de l entreprise avec son public. STRATÉGIE 17 BELGACOM RAPPORT D ACTIVITÉS 2013 A côté de Proximus, Scarlet continue à cibler les clients particulièrement sensibles au prix. Une marque : Proximus. Une entreprise : Belgacom. Au fil des années, Belgacom est devenue un acteur télécom de premier plan. Il est donc légitime qu elle continue de conserver son nom et son statut en tant qu entité juridique, employeur et entreprise cotée en Bourse, tant vis-à-vis de ses collaborateurs que de ses divers interlocuteurs. Toujours plus de simplicité >> La simplification nous permet de réduire les coûts et d améliorer l expérience client. Construire la culture du futur : «From Good to Gold» Soucieuse de rassembler toutes ses forces vives derrière des objectifs communs, Belgacom met en œuvre différents leviers pour évoluer vers une culture d entreprise synonyme de meilleure qualité de service et de meilleurs résultats. Par exemple, les membres du management, quel que soit leur département, auront tous un même objectif au niveau du Groupe à partir de La collaboration renforcée entre les départements améliorera et accélérera les prises de décision. Le but est de développer une culture «From Good to Gold» stimulant la performance, le respect, le feedback et la communication transparente.

21 BELGACOM RAPPORT D ACTIVITÉS 2013 STRATÉGIE 18 DES CONTENUS À VOIR, À VIVRE ET À PARTAGER, PARTOUT ET TOUT LE TEMPS En 2013, Belgacom a encore renforcé sa stratégie de contenus en étant à la fois distributeur, producteur et coproducteur. Son offre de programmes s est encore enrichie de nouvelles fonctionnalités qui procurent davantage de liberté et de confort. Le consommateur peut désormais accéder à une foule de divertissements, quels que soient ses goûts, le moment de la journée, l endroit où il se trouve et le type de terminal qu il utilise. Les contenus créent la valeur ajoutée Depuis près de dix ans, Belgacom investit non seulement dans la technologie mais également dans son offre de contenus. Son objectif : redéfinir en permanence l expérience de consommation télévisuelle. Pionnière en Belgique et en Europe, Belgacom a compris que la télévision numérique était une extension naturelle du métier d opérateur télécom et une source de valeur ajoutée pour ses clients. Au début, cette valeur ajoutée était liée aux qualités intrinsèques de la télévision numérique : qualité d image, accès à une offre de programmes toujours plus abondante, consommation «à la demande», facilité d enregistrement, etc. Au fil des ans, des centaines de milliers de Belges ont intégré la télévision numérique et le décodeur Belgacom à leur salon. Ce nouveau mode de consommation de la télévision est à présent entré dans les mœurs. Une convergence à quatre dimensions Au rythme des innovations technologiques, la consommation de contenus s est faite de plus en plus intuitive et personnalisée. Elle a donné corps à la stratégie de convergence chère à Belgacom : l abonné peut désormais regarder «ce qu il veut» (pour tous les goûts, du plus universel au plus local), «où il veut» (sur ordinateur, téléviseur, tablette ou smartphone) et «quand il veut» (en direct ou en différé). Il convient d y ajouter une quatrième dimension qui prend toute son importance : «sur la plateforme de son choix». Effectivement, alors que certains fournisseurs de contenus privilégient des >> Plus de titres disponibles en vidéo à la demande 70 >> Plus de 70 chaînes dans l offre de base de Belgacom TV Des exclusivités belgacom tv >> Belgacom TV propose des pass sur mesure pour les enfants ou les fans de films classiques, et du contenu foot et basket exclusif sur les chaînes Belgacom 11, 11+ et 5

22 systèmes «fermés», Belgacom apporte une même qualité d accès sur un maximum de terminaux multimarques et poursuit une stratégie multiplateformes ouverte à tous les systèmes d exploitation. Un argument de fidélisation Notre offre de contenus est stratégique. Elle rend notre expertise technique directement tangible pour le client. Elle est également cruciale : sur un marché volatil, l accès à tout moment à un contenu riche et varié est devenu un outil important de fidélisation. Le consommateur qui vit une expérience unique, en regardant un match de foot sur son smartphone ou en profitant en famille des possibilités de la télévision «intelligente» (la «smart tv»), sera bien conscient de notre valeur ajoutée. Il n aura dès lors pas envie d aller voir ailleurs. Au contraire, il sera sans doute tenté de consommer davantage de programmes, ce qui augmente nos revenus moyens par client. Cette stratégie de contenu nous permet ainsi de créer un lien émotionnel fort avec lui. A tout moment et sur tout type d écran En 2013, Belgacom a lancé TV Replay en phase de test auprès de clients. Ce service permet de regarder n importe quel programme TV jusqu à 36 heures après sa diffusion sur tout type d écran, du téléviseur au smartphone. Ce nouveau service exclusif en Belgique développé en étroite collaboration avec les principales chaînes de télévision belges répond avant tout au besoin croissant du consommateur de regarder son contenu favori quand il le souhaite. Plus largement, la consommation multi-écrans à travers l offre TV Partout a gagné en popularité ces derniers mois. Belgacom offre désormais le plus large choix, avec une quarantaine de chaînes disponibles au bout des doigts, sur smartphone ou tablette. Il est d ailleurs frappant de constater que les pics d audience enregistrés sur TV Partout ont le plus souvent lieu lors de programmes en direct, et notamment des matches de football. Une offre élargie pour tous les goûts Notre palette de chaînes et de bouquets a encore été élargie, avec une attention particulière pour le contenu local. Nous proposons par exemple la chaîne thématique Dobbit TV (consacrée au bricolage) et en exclusivité la chaîne Fashion One dédiée à la mode et aux tendances. En juillet, nous avons lancé le Bouquet Multi, qui regroupe les bouquets existants Kids, Entertainment, Nature & Discovery, Nostalgie, Sport & Pleasure, en proposant ainsi plus de 40 chaînes thématiques en un seul bouquet. Pour que le client se retrouve facilement dans notre offre abondante de chaînes et de vidéos à la demande, nous avons encore amélioré nos outils de recherche personnalisée et de recommandations, pour satisfaire les attentes les plus pointues. Des nouveautés foot Notre chaîne foot Belgacom 11+ accueille désormais la League Cup britannique. L UEFA Champions League (avec son célèbre multi live), et le meilleur des championnats espagnol et portugais constituent toujours nos valeurs sûres. Notre offre foot se différencie également par des émissions consacrées aux coulisses de clubs belges comme RSCA TV, Club TV, Charleroi TV ou de grands clubs internationaux via nos partenariats exclusifs avec Barça TV, Real Madrid TV, Manchester United TV, et Manchester City TV. En 2013, nous avons aussi diffusé des contenus exclusifs liés à nos Diables Rouges, dont nous sommes partenaires depuis 20 ans : le documentaire Everyday Football sur la vie en communauté de notre équipe nationale et de tous les acteurs de football belge ou encore les matches des équipes espoirs. TV Replay >> Lancé en 2013, ce service permet de regarder un programme jusqu à 36 heures après sa diffusion, sur tout type d écran Des partenariats privilégiés Etre à la fois distributeur et (co)producteur de contenus ouvre de nombreuses portes et permet de proposer une offre différenciatrice aux téléspectateurs et internautes mobiles. Le sponsoring nous permet d être présents sur le terrain du sport, de la musique et de la culture, aux grand événements nationaux comme à l échelon local, de partager des moments forts avec le public et obtenir du contenu que nous distribuons ensuite sur différentes plateformes. Sur le plan sportif, Belgacom met en valeur ses partenariats privilégiés avec le basket belge, le foot et le cyclisme. Mais nous sommes également présents aux principaux festivals musicaux dont nous offrons la diffusion en streaming à nos clients, au Festival du film de Gand, à Bozar ainsi qu au Concours musical Reine Elisabeth. Enfin, être co-producteur sur plus de 20 films belges ou belgo-français par an nous permet d être associé à plusieurs grandes avant-premières cinéma. Pour la première fois en Belgique, nous avons également organisé une diffusion en avant-première de la sortie vidéo des films Brasserie Romantiek et Stars 80, au domicile de clients Belgacom TV, respectivement à Malines et à Huy. Un investissement permanent Dans les mois et les années qui suivent, Belgacom va continuer d investir dans l enrichissement de son offre contenus, autant dans des programmes locaux que des blockbusters internationaux. Une majorité de ces programmes pourront être regardés à la demande, en direct ou en différé et sur un maximum de plateformes, au gré des envies du consommateur. Cette expérience télévisuelle unique et convergente est indissociable de notre métier d opérateur de télécommunications. La valeur ajoutée de nos réseaux de plus en plus intelligents devient ainsi tangible pour tous nos clients. STRATÉGIE 19 BELGACOM RAPPORT D ACTIVITÉS 2013

23 LA SIMPLIFICATION AU SERVICE DU CLIENT BELGACOM RAPPORT D ACTIVITÉS 2013 SIMPLIFICATION 20 En 2013, Belgacom s est engagée dans un projet de simplification ambitieux. Ce projet est l un des piliers de la nécessaire transformation de l entreprise. La simplification vise à améliorer l expérience client tout en générant des gains d agilité et d efficacité. Ces trois objectifs contribuent également à réduire les coûts opérationnels et se traduiront par des changements structurels bénéfiques pour la rentabilité de Belgacom à moyen et à long terme. Le projet de simplification couvre quatre domaines clés >> Belgacom a migré plus de lignes basées sur des technologies analogiques vers de nouveaux standards Un portefeuille de produits et services simplifié et tourné vers l avenir Nos clients attendent de nous des offres de plus en plus simples. Pour cette raison, Belgacom attache une attention particulière à la simplification de ses offres commerciales en réduisant le nombre d options pour les abonnés mobiles et en proposant des offres convergentes «packs tout compris» qui répondent aux besoins de la majorité de ses clients. Par exemple, le nombre de clients qui sont abonnés à l offre globale Internet Partout/Bizz Pack n a cessé d augmenter. De plus en plus de services auparavant disséminés sont désormais regroupés au sein d un même forfait, ce qui facilite la facturation et le suivi administratif pour le client comme pour Belgacom. En 2013, Belgacom a réalisé une série de migrations d anciennes solutions vers des solutions tournées vers l avenir. Belgacom s est engagée à poursuivre la simplification structurelle de son portefeuille de produits et services pour en réduire les coûts de maintenance et améliorer encore l expérience client.

24 Un réseau simplifié La gestion parallèle de réseaux de différentes générations représente un défi et un coût important. En 2013, Belgacom a réalisé des progrès substantiels dans la simplification de son infrastructure réseaux. Le projet de simplification du réseau, baptisé Mantra, a ainsi déjà permis de migrer plus de lignes fixes d ancienne génération vers de nouveaux standards, avec comme objectif d améliorer encore l expérience client. Au niveau du réseau backbone, des lignes ATM ont été remplacées par des solutions et des technologies d avenir. Belgacom poursuivra la suppression des anciennes technologies pour accroitre encore les services à valeur ajoutée pour ses clients. >> L OPTIMISATION DE NOS SYSTÈMES INFORMATIQUES PERMET UNE MEILLEURE EXPÉRIENCE CLIENT. Une architecture simplifiée pour les systèmes informatiques Nous avons également lancé un vaste projet d optimisation de nos systèmes informatiques. Il vise notamment à accélérer la mise sur le marché de nouveaux produits, tout en simplifiant la gestion du catalogue de produits et services existants. En 2013, de nouvelles solutions logicielles ont été implémentées pour permettre aux différents départements de travailler plus efficacement et plus rapidement à toutes les étapes de nos interactions avec les clients, de la recherche d information sur nos solutions jusqu au paiement des factures ou à la gestion des besoins clients. Un nombre de fournisseurs rationalisé Belgacom a pu réduire le nombre de ses fournisseurs et partenaires pour certains segments de marché. Diminuer le nombre de fournisseurs a permis de simplifier et d alléger la procédure d approvisionnement, de l appel d offre à la gestion des factures en passant par la logistique et la livraison, ce qui se traduit également par des économies substantielles. Enfin, des partenariats moins nombreux mais plus stratégiques donnent la possibilité d entretenir des relations privilégiées avec nos partenaires. Cet effort va être poursuivi en FOCUS UNE EXPÉRIENCE CLIENT AMÉLIORÉE Belgacom a remplacé proactivement pas moins de décodeurs de télévision numérique par des modèles plus évolutifs. Les clients peuvent désormais profiter d une meilleure expérience de la TV en HD (haute définition), davantage de possibilités d enregistrement et une interface permettant une navigation plus rapide et aisée parmi les menus. SIMPLIFICATION 21 BELGACOM RAPPORT D ACTIVITÉS 2013 La simplification, c est aussi un état d esprit et une culture à entretenir En mettant la simplification au cœur de ses priorités, Belgacom a entamé un changement profond de sa culture d entreprise. Ce processus de transformation est soutenu et accompagné au plus haut niveau de l entreprise. L adhésion d un maximum de collaborateurs est un des facteurs-clés pour assurer la réussite de ce projet >> En 2013, Belgacom a migré clients vers des offres convergentes Internet Partout et Bizz packs PLUS ORIENTÉ CLIENT >> Plus compréhensible >> Plus convivial >> Interaction aisée PLUS RAPIDE >> Délais de lancement de produits ou services réduits >> Activations en temps réel >> Résolution plus rapide des problèmes PLUS EFFICACE >> Optimisation des coûts pour l IT et le réseau >> Processus plus efficaces + + = MEILLEURS RÉSULTATS FINANCIERS

25 CRÉER DE LA VALEUR ET LA PARTAGER BELGACOM RAPPORT D ACTIVITÉS 2013 CONTRIBUTION 22 Belgacom est une entreprise connue et reconnue dans notre pays depuis des générations. Son importance pour l économie et la société belge dans son ensemble n a fait que croître, parallèlement à la présence de plus en plus déterminante des nouvelles technologies dans nos vies et nos entreprises. En tant que leader et moteur d innovations, Belgacom est pleinement consciente de sa responsabilité envers la société dans laquelle nous vivons. Nous sommes persuadés que le succès de notre entreprise dépend de notre capacité à contribuer de manière positive au progrès économique, social et environnemental. Nous voulons créer de la valeur et surtout la partager par le biais de nos infrastructures, nos solutions et nos collaborateurs. UN ACTEUR ÉCONOMIQUE IMPORTANT En 2013, malgré un marché compliqué, nous avons continué d investir pas moins de 972 millions EUR, principalement dans des réseaux de plus en plus performants. Parallèlement, le prix de nos solutions n a cessé de diminuer. Nous facilitons ainsi l accès aux télécommunications au plus grand nombre. Nous sommes également l un des principaux employeurs du pays, avec près de collaborateurs. Nos collaborateurs sont à nos yeux notre meilleur atout. Nous investissons chaque année dans leur développement et leur formation. En 2013, chaque collaborateur a suivi en moyenne 23h de formation! Contributions directes En 2013, nous avons payé 1,67 milliards EUR en impôts, charges sociales et dividendes. LA RESPONSABILITÉ AU CŒUR DE NOS ACTIVITÉS Nous reconnaissons la nécessité d une gestion responsable et transparente de nos activités vis-à-vis de toutes nos parties prenantes. À cet égard, nous considérons la responsabilité sociétale d entreprise (RSE) comme un outil de gestion stratégique et un élément clé de notre mission et de notre stratégie d entreprise. Notre stratégie en matière de RSE vise à contribuer à une société (numérique) plus inclusive, plus sûre et plus écologique, tout en veillant à exercer nos activités de manière éthique et responsable. NOTRE STRATÉGIE RSE DÉFIS Fracture numérique Sécurité en ligne Changement climatique Vieillissement de la population >> LES SMARTCAFÉS SONT ORGANISÉS DANS 14 DE NOS POINTS DE VENTE ET PROPOSENT 13 FORMATIONS SUR LES PRODUITS ET SERVICES TÉLÉCOM STRATÉGIE ENGAGEMENTS Favoriser une (e)-société plus inclusive, plus sûre et plus écologique 1 Améliorer l accès aux communications 2 Encourager une utilisation responsable de nos produits 3 Favoriser une société à faible carbone 4 Activités éthiques et responsables (collaborateurs, fournisseurs, communautés)

26 PERSONNES DÉFAVORISÉES FORMÉES EN COMPÉTENCES NUMÉRIQUES PAR BELGACOM CONTRIBUTION 23 BELGACOM RAPPORT D ACTIVITÉS Améliorer l accès aux communications Nos investissements massifs dans l infrastructure numérique en Belgique améliorent l accès à la technologie et aux services de base, permettant aux personnes et aux entreprises d interagir tout en générant des avantages économiques. Nous mettons un point d honneur à améliorer les connaissances informatiques des citoyens en aidant le plus grand nombre à se connecter à internet et à profiter des avantages de la société numérique. Nous avons lancé en septembre 2013 SmartCafé, une série de 13 formations sur nos produits et services. Ces formations, ouvertes à tous, ont été données dans 14 de nos points de vente. 500 personnes y ont déjà participé. >> Web Experts pour le partage entre générations Par ailleurs, l initiative Web Experts, encourageant les jeunes à partager leurs connaissances de l internet avec les personnes plus âgées, a été poursuivie. Nous avons continué à soutenir différents centres de formation ICT. Au total, nous avons aidé plus de personnes défavorisées à améliorer leurs compétences numériques >> Des appareils adaptés aux personnes handicapées Nous avons continué à développer notre catalogue d appareils et d applications pour les personnes porteuses de handicap. Dans notre catalogue général de téléphones mobiles et de tablettes, nous avons également créé un filtre permettant d identifier facilement les appareils les mieux adaptés aux besoins spécifiques de nos clients. >> >> Encourager une utilisation responsable de nos produits Parce que les télécoms occupent une place de plus en plus importante dans nos vies, nous encourageons une utilisation sûre et responsable de nos solutions. Nous mettons l accent sur la communication d informations sur les champs électromagnétiques et la santé. Nous sommes aussi très impliqués dans la protection des enfants sur internet. Cette politique est bénéfique pour notre image de marque et positionne Belgacom comme un partenaire de référence. Nous construisons ainsi une relation de confiance avec nos parties prenantes.

27 BELGACOM RAPPORT D ACTIVITÉS 2013 CONTRIBUTION 24 Collaboration avec Child Focus En 2013, nos collaborateurs ont dispensé des formations sur la sécurité sur internet à plus de enfants dans 185 écoles primaires, en collaboration avec Child Focus (Centre belge pour la Sécurité en ligne) et Microsoft. Exposition aux ondes électromagnétiques Quant à notre réseau mobile, nous ne cessons de l étendre de manière socialement responsable, dans le respect des normes régionales strictes en matière d exposition aux champs électromagnétiques. Favoriser une société à faible carbone Nous sommes déterminés à accélérer l évolution vers une société qui émet moins de carbone. Notre objectif est de réduire nos émissions de CO 2 de 70% d ici 2020 (par rapport à 2007). Parallèlement, nous aidons nos clients à réduire leur propre impact environnemental. Consommation énergétique réduite de 3% La consommation énergétique propre de Belgacom a diminué pour la troisième année consécutive de plus de 3%. Nous avons ainsi réussi à réduire notre empreinte écologique de 2% supplémentaires. Notre transparence en la matière et nos performances en matière de lutte contre le réchauffement climatique nous ont valu 2 CDP awards (CDP est une organisation internationale sans but lucratif qui fournit le seul système global de mesure, de reporting, de gestion et de partage de l information environnementale). Nous faisons désormais partie des 5 opérateurs télécoms européens présentant les meilleurs résultats sur ce point. Valorisation des déchets Pas moins de 83% de nos déchets ont été recyclés et une grande partie des matières non recyclables est utilisée pour la génération d énergie. En collaboration avec l asbl GoodPlanet Belgium, nous avons initié une grande action de sensibilisation au recyclage des téléphones portables dans les écoles. Les téléphones portables contiennent en effet de nombreux métaux précieux et matériaux qui peuvent vivre une deuxième vie. Des solutions ICT bonnes pour l environnement Enfin, nos solutions ICT, comme la vidéoconférence ou le cloud, aident également nos clients à faire des économies d énergie et donc à réduire leurs émissions de CO 2. Éthique dans notre façon de travailler Nous entendons mener nos activités de manière responsable et éthique vis-à-vis de nos collaborateurs, de nos fournisseurs et des communautés dans lesquelles nous sommes présents. Nous sommes ainsi en mesure d établir une relation de confiance avec nos parties prenantes, de protéger notre image, d améliorer l engagement de nos collaborateurs, de contribuer à l intégration sociale et de tisser des liens plus étroits avec nos fournisseurs et les communautés. Notre Charte de gouvernance d entreprise, notre Code de conduite, notre Compliance Office et nos «policies» confortent notre approche de responsabilité sociétale d entreprise. EVOLUTION DE NOS ÉMISSIONS DE CO 2-63% -70% OBJECTIF % >> Depuis 2007, nous avons réduit nos émissions de CO 2 de 63%

28 Les axes principaux de nos chartes éthiques sont : Une culture de travail positive Nous croyons au développement professionnel de nos collaborateurs. Nous luttons contre toute forme de discrimination et promouvons l équilibre vie privée/vie professionnelle des collaborateurs. Nous avons notamment lancé en 2013 les deux premières phases d un projet offrant la possibilité à nos collaborateurs de travailler à domicile deux jours par semaine. Notre promotion d un environnement de travail agréable nous vaut d être sélectionnés en tant que «Top Employer» depuis plusieurs années (lire également notre chapitre «Une organisation toujours plus agile»). La chaîne d approvisionnement Nous appliquons des critères éthiques de plus en plus stricts pour l ensemble de notre chaîne d approvisionnement, en étroite collaboration avec nos fournisseurs. En intégrant des normes RSE à nos procédures d achats, nous améliorons non seulement notre image de marque mais nous apportons également des changements bénéfiques dans les communautés où nos fournisseurs sont présents. Nos fournisseurs doivent obéir à des normes sociales, éthiques, en matière de sécurité et environnementales bien définies. Nous contrôlons régulièrement le respect de ces normes à travers des enquêtes et par le dialogue avec nos fournisseurs. En 2013, 140 fournisseurs ont rempli notre questionnaire CSR d auto-évaluation, et les 59 fournisseurs repris dans la catégorie «risque moyen à élevé» ont été invités à mettre en place un plan d action correctif. 38 audits sur site ont été conduits et partagés par les membres du «Joint Audit Cooperation» (JAC). Belgacom elle-même a conduit 4 de ces audits sur site.la RSE fait partie intégrante des rapports de performances de nos fournisseurs, des contrats et des critères d appels d offre. Nous avons remis un sustainability award à l un de nos fournisseurs locaux. La RSE fait partie intégrante des rapports de performances de nos fournisseurs, des contrats et des critères d appels d offre. Nous avons remis un sustainability award à l un de nos fournisseurs locaux. >> >> enfants formés sur la sécurité sur internet et les nouveaux médias Soutenir nos communautés La contribution de Belgacom à la société prend également une tournure très concrète sur le terrain. En 2013, nous avons investi plus de 1,8 millions EUR dans des actions sociales, que ce soit sous la forme de dons en argent, de mise à disposition de services ou d actions de bénévolat de la part de nos collaborateurs. Nous avons par exemple continué de fournir une connectivité large bande gratuite à Bednet et Take Off afin de permettre à des enfants souffrant d une longue maladie de rester en contact avec leur classe. Début 2013, nous avons offert 2500 nuitées à des sans-abri dans l un de nos bâtiments. Nous avons aussi permis de récolter plus de EUR à travers nos services SMS. Nos divisions commerciales proposent à nos clients de convertir les points acquis via nos plans de loyauté en dons à l Unicef et à la Fondation Contre le Cancer. En 2013, ce sont ainsi plus de EUR qui ont pu être versés aux associations. Les efforts consentis ces dernières années pour donner une tournure concrète à notre responsabilité sociétale ont été reconnus par des parties indépendantes, comme le montre notre intégration dans différents indices RSE tels qu Ethibel Sustainability Index, l ASPI, CDP et le Triodos Sustainable Investment Universe. CONTRIBUTION 25 BELGACOM RAPPORT D ACTIVITÉS 2013 Plus d informations sur >> >> Vos commentaires concernant notre engagement dans le domaine de la RSE et votre avis sur ce rapport sont les bienvenus à l adresse csr@belgacom.be

29 NOS RÉSEAUX SONT L OSSATURE DES NOUVEAUX SERVICES BELGACOM RAPPORT D ACTIVITÉS 2013 RÉSEAUX 26 Nos réseaux sont les principaux atouts de Belgacom. En 2013, nous avons poursuivi le développement technologique de nos réseaux fixes et mobiles et posé de nouveaux jalons sur la voie de leur simplification. Nous nous sommes également souciés d améliorer la qualité de nos services et d en développer de nouveaux. 82% >> de clients satisfaits de l installation de nos services ± 89% >> de couverture VDSL2

30 Un réseau mobile rapide de qualité supérieure En 2013, Belgacom a de nouveau investi considérablement dans la qualité de son réseau. Ainsi, nous avons augmenté la vitesse moyenne du réseau 3G de 60 %. Nos clients profitent désormais d une vitesse de téléchargement moyenne de 6,2 Mbps, avec des pointes à 21 Mbps. Nous avons également augmenté sa capacité de 70 %, afin de pouvoir soutenir l essor des données mobiles. Une étude indépendante de Test Achats réalisée au premier semestre de 2013 a classé notre réseau mobile comme le meilleur de Belgique par sa qualité. Premier opérateur belge à offrir une couverture 4G de 50 % Fin 2013, le tout nouveau réseau 4G de Belgacom a atteint le cap de 50 % de couverture de la population belge. La nouvelle technologie 4G permet d accéder à l internet ultrarapide, avec une vitesse moyenne de téléchargement de 19 Mbps et des pointes pouvant même atteindre 56 Mbps. Nous avons également élaboré une solution permettant de déployer la 4G dans les 19 communes de la Région de Bruxelles-Capitale. Début 2014, Belgacom aura été le premier opérateur à lancer la 4G dans une première série de sites bruxellois. Notre engagement à poursuivre le déploiement de la couverture 4G Belgacom continue d investir afin de permettre à un maximum de clients de bénéficier de l internet mobile ultrarapide grâce à la technologie 4G. FOCUS NOTRE ENGAGEMENT EN MATIÈRE DE CYBERSÉCURITÉ >> La sécurité des systèmes et des données est une priorité absolue pour Belgacom. En tant qu entreprise leader sur le marché, Belgacom doit jouer un rôle d exemple et de moteur en matière de confidentialité des données et de protection de la vie privée. >> En 2013, Belgacom a été l objet d une intrusion dans ses systèmes internes. Cette intrusion a été amplement commentée dans la presse et nous avons fait preuve de toute la transparence nécessaire. >> Cet épisode aura été une leçon, qui nous incite à être toujours plus vigilants et à optimiser sans cesse nos systèmes de protection. Quelques mois plus tard, on peut affirmer que la mobilisation rapide pour détecter et solutionner le problème a été riche d enseignements. Nous pouvons à présent partager ces connaissances avec nos clients et les autorités compétentes. >> Cet incident n a fait que renforcer l engagement de Belgacom en faveur de la cybersécurité dans tous ses aspects. Le nouveau plan de cyberdéfense prévoit en 2014 un large éventail d actions dans différents domaines : mesures structurelles et de gouvernance, sensibilisation continue de nos collaborateurs aux enjeux de la cybersécurité, protection optimale des réseaux et plateformes IT et création d une Cyber Defense Unit exclusivement dédiée à détecter et résoudre les cyberincidents. VOIR À TRAVERS LES YEUX DU CLIENT >> L ACCROISSEMENT DE LA SATISFACTION DU CLIENT EST NOTRE PRIORITÉ. C est pourquoi nous avons acquis, pour un montant de 120 millions EUR, l une des trois licences mises aux enchères par l IBPT, l autorité de réglementation des télécoms, pour utiliser le spectre de 800 MHz. Cette licence, valable pour une période de 20 ans, permet d assurer une couverture plus homogène dans des zones plus éloignées des centres urbains. Un réseau fixe puissant et de plus en plus rapide Belgacom a poursuivi en 2013 le déploiement de son réseau VDSL2, dont la couverture a atteint +/- 89% de la population belge. Grâce à la technologie VDSL2, une large majorité de nos clients peuvent bénéficier d une connexion internet performante, avec une vitesse moyenne de 33 Mbps, et de la télévision en haute définition. De même, le réseau VDSL2 se prête particulièrement bien à diverses applications nouvelles, comme le stockage de documents, de photos et de vidéos dans le cloud et diverses solutions TV personnalisées, à l instar de TV Replay. Une vitesse plus élevée grâce au Dynamic Line Management En 2013, Belgacom a fait passer son réseau VDSL2 à la vitesse supérieure, grâce à sa technologie Dynamic Line Management, développée en interne. Cette technologie permet de surveiller en permanence la stabilité d une ligne et de l adapter à la vitesse maximale lorsque c est techniquement possible. Nous sommes ainsi parvenus à augmenter de 30 % la vitesse moyenne de toutes les lignes VDSL2, un tiers de celles-ci bénéficiant même de vitesses pouvant atteindre 50 Mbps. La vectorisation, pour un réseau encore plus performant Belgacom est pionnière dans le domaine de la vectorisation. Il s agit d une technologie de réduction de bruit qui dope les performances des lignes VDSL2 et qu elle a développée en partenariat avec Alcatel-Lucent et d autres partenaires industriels de référence. En 2013, Belgacom a été le premier opérateur à tester la vectorisation en situation réelle sur son réseau VDSL2 auprès d un millier d utilisateurs effectifs. La phase de développement s est clôturée fin décembre Belgacom a pu ainsi activer la vectorisation chez des clients disposant d un tout nouveau modem, capable de soutenir les vitesses offertes par cette technologie. RÉSEAUX 27 BELGACOM RAPPORT D ACTIVITÉS 2013

31 BELGACOM RAPPORT D ACTIVITÉS 2013 RÉSEAUX 28 Début 2014, Belgacom entamera le déploiement de la vectorisation sur son réseau, pour permettre à une majorité de clients de bénéficier de vitesses garanties jusqu à 70 Mbps. Internet partout grâce à la puissance du réseau wi-fi Belgacom a également poursuivi à un rythme soutenu l activation de hotspots wi-fi. Fin 2013, nos clients pouvaient ainsi utiliser quelque hotspots en Belgique et 12 millions dans le monde, grâce à notre accord de collaboration avec Fon. La simplification progressive de nos réseaux La simplification de nos réseaux a pour but de réduire nos coûts d exploitation afin de rendre à terme notre entreprise plus efficace et plus flexible. Dans une première phase, notre objectif estde supprimer progressivement l ancien appareillage de téléphonie et de données. Nous pourrons ainsi libérer m² d espaces techniques (soit un quart de la totalité dont nous disposons) en supprimant progressivement 25 bâtiments techniques environ. Fin 2013, nous avions déjà migré lignes téléphoniques et lignes de données vers des nouvelles plateformes modernes afin de permettre ces suppressions. Nous avons également signalé à l IBPT, l autorité de réglementation des télécoms, notre intention de libérer 19 bâtiments techniques dans les prochaines années. FOCUS UN RÉSEAU MOBILE PERFORMANT AUX MOMENTS IMPORTANTS Le réseau mobile de Belgacom a une nouvelle fois démontré sa qualité lors de grands événements comme Rock Werchter, le festival de Dour, Tomorrowland, etc. L afflux traditionnel de communications à la Saint-Sylvestre a également pu être géré sans le moindre incident. Ce jour-là, le réseau a traité 30 millions de SMS, tandis que le trafic de données mobiles a doublé par rapport à Un service de meilleure qualité et une gamme de nouveaux services pour nos clients L accroissement de la satisfaction de notre clientèle est un des éléments positifs de Il est le résultat de l amélioration de nos services et du développement de nouveaux produits plus simples et plus conviviaux. Des indicateurs de satisfaction en hausse La satisfaction de la clientèle liée à l installation de nos produits et services a augmenté en 2013 pour atteindre un niveau record de près de 82 %. La fiabilité et la stabilité de nos réseaux et de nos systèmes ont elles aussi augmenté de 10 % par rapport à 2012, contribuant ainsi à la qualité des résultats obtenus. La simplification de nos systèmes IT a également permis d accroître l efficacité de notre service à la clientèle (voir détails p.20). Une expérience télévisuelle enrichie Afin de proposer à ses clients un contenu enrichi et personnalisé, Belgacom a lancé en juin 2013 un nouveau décodeur TV plus rapide, plus réactif et plus économe en énergie. De même, nous avons développé une solution Wi-Fi Bridge, qui permet de recevoir sans fil plusieurs chaînes TV de qualité supérieure sur un ou plusieurs postes de télévision. Nous avons également rendu notre application TV Partout nettement plus conviviale. Il ne faut plus que quelques secondes pour lancer l application et regarder Belgacom TV sur un smartphone ou une tablette. Nous avons également amélioré le service Belgacom TV en élaborant l option TV Replay, qui permet de regarder des programmes TV jusqu à 36 heures après leur diffusion, sans devoir les enregistrer. Dans une première phase, cette nouvelle option est testée par clients. Une offre de cloud en pleine évolution Belgacom continue à étendre son infrastructure cloud pour continuer à suivre la demande croissante des clients privés et professionnels. L offre destinée aux clients professionnels s est enrichie de la suite bureautique Office 365 et d une solution de stockage, de backup et de webshop. FOCUS ACTIVATION DU PREMIER UTILISATEUR TEST SUR FIBRE OPTIQUE En 2013, nous avons franchi un cap important en matière de pose de fibre optique. Pour la première fois, en effet, nous avons réalisé un raccordement en fibre optique («Fiber To The Home», alias FTTH) chez un utilisateur-test sur la base d une nouvelle méthode standard. La fibre optique présente l avantage d offrir un débit bien supérieur à ce que permet de câble de cuivre.

32 Belgacom a également pensé à ses clients privés, pour lesquels elle a conçu une solution de cloud personnel. Les clients peuvent ainsi sauvegarder et gérer à leur gré leurs contacts, photos, musiques et vidéos depuis leur smartphone, leur tablette, leur laptop et leur PC. Cette solution est également en phase de test, auprès de clients. Bâtir l avenir sur des fondements solides Notre priorité est d améliorer en permanence la qualité de nos réseaux, de les simplifier et, plus que jamais, de rendre nos produits toujours plus faciles à utiliser par nos clients. Par ailleurs, nous réfléchissons aussi à long terme et anticipons les besoins futurs des consommateurs et des entreprises pour les 5 à 10 prochaines années. C est pourquoi nous investissons dès aujourd hui dans des réseaux fixes et mobiles d avenir, encore plus rapides et plus intelligents. Enfin, nous continuerons à soutenir les objectifs des services de vente et de support à l aide de nouveaux outils IT et proposer ainsi à nos clients un service plus performant et plus efficace. UNE ACTIVITÉ DE GROSSISTE QUI A TOUTE SON IMPORTANCE >> Moins connue, l expérience client unique de Belgacom se manifeste également sur le marché dit «de gros». Via sa division Carrier & Wholesale Solutions, Belgacom fournit toute une série de solutions télécoms à de nombreux opérateurs en Belgique : services de connectivité, accès haut débit (DSL), etc. >> L activité de grossiste de Belgacom s est développée à la suite de la libéralisation des télécoms. Pour stimuler la libre concurrence, le régulateur a imposé à l opérateur historique d ouvrir ses réseaux à des tiers. Au fil des ans, Belgacom a ainsi pu compter un nombre croissant de clients opérateurs, autant sur le marché des entreprises que sur le marché résidentiel. Une part croissante des accords signés entre opérateurs n est plus directement liée au contexte régulatoire mais s inscrit dans des partenariats commerciaux plus larges. >> Faciliter les partenariats avec des tiers L une des priorités de Belgacom en tant que grossiste est d ailleurs de créer un modèle ouvert facilitant la création de partenariats avec d autres opérateurs. Il s agit notamment des opérateurs de réseaux mobiles virtuels (MVNO), mais aussi d acteurs over the top, qui proposent des services télécoms sur l internet sans passer par les réseaux traditionnels. Ces partenariats permettent d accélérer la rentabilisation des investissements massifs dans les réseaux et les plates-formes. >> Lancement de SNOW Sur le marché des consommateurs, un fait marquant de 2013 a été le lancement opérationnel de SNOW, une offre «triple play» (téléphonie fixe, internet et télévision) de BASE, suite à un accord commercial sur cinq ans entre l opérateur néerlandais KPN et la division wholesale de Belgacom. RÉSEAUX 29 BELGACOM RAPPORT D ACTIVITÉS % >> de couverture 4G fin 2013 ; jusqu à 56 Mbps de téléchargement 3,4% >> l activité «wholesale» de Belgacom au niveau national a généré en 2013 environ 3,4% du chiffre d affaires du groupe

33 BELGACOM RAPPORT D ACTIVITÉS 2013 RESSOURCES HUMAINES 30 UNE ORGANISATION TOUJOURS PLUS AGILE

34 Belgacom a plus que jamais besoin de collaborateurs motivés et performants pour relever les défis d un marché hyperconcurrentiel. Nos structures et nos modes de fonctionnement doivent gagner en agilité pour répondre aux exigences croissantes de nos clients. Il ne s agit plus d être simplement bons. Nous devons être excellents. En 2013, l entreprise a continué d investir dans la formation de ses talents pour que la collaboration, la confiance, la transparence et l agilité fassent partie de son ADN. Les collaborateurs constituent le capital le plus important de Belgacom. Il est possible de copier des produits, mais pas un savoirfaire et une expertise uniques. Dans le passé, nous sommes partis du principe que nous devions d abord renforcer l engagement de nos collaborateurs. Il était communément accepté que des collaborateurs plus engagés fournissaient aussi des prestations de meilleure qualité. Nous avons toutefois remarqué que cette hypothèse ne se vérifiait pas entièrement. Par exemple, la création d un environnement de travail propice à la performance revêt une importance cruciale. C est pourquoi nous mesurons aussi un certain nombre d autres paramètres à l aide de notre enquête annuelle auprès du personnel et mettons sur pied des actions d amélioration. Ces actions nous permettent d évoluer vers une entreprise agile, hautement performante et apte à répondre efficacement aux évolutions rapides du marché. FOCUS LE CHOIX DE LA DIVERSITÉ >> Au niveau des générations Belgacom considère la diversité comme un atout. En 2013, nous avons en particulier mis l accent sur celle des générations. L élaboration de projets HR tient essentiellement compte, désormais, des phases de vie des collaborateurs et non plus des catégories d âge. >> Au niveau hommes-femmes La diversité hommes-femmes, centrale dans notre approche HR, est devenue un point d attention dans tous les départements traditionnellement les plus masculins. Les départements SDE (réseaux) et EBU (clients professionnels) ont notamment organisé des sessions d information et de sensibilisation sur la diversité hommes-femmes et l importance de la mixité dans les fonctions dirigeantes. >> LA FLEXIBILITÉ DE TOUS EST UNE PRIORITÉ. LE PROGRAMME «FLEX» NOUS AIDE À CHANGER NOTRE MANIÈRE DE TRAVAILLER. Des leaders catalyseurs du changement Personne n a autant d impact sur les prestations des collaborateurs que leur supérieur immédiat. A cet égard, une des priorités de Belgacom en 2013 a été de renforcer les capacités de leadership et d adaptation au changement de ses cadres et dirigeants. Ce parcours de développement de culture est mené du sommet à la base de l entreprise, des membres du Comité de Direction aux team leaders sur le terrain. Encore plus de responsabilisation et de confiance réciproque Belgacom a défini quatre piliers sur lesquels tous les cadres et dirigeants doivent s appuyer dans leurs interactions quotidiennes avec leurs collaborateurs : l esprit d équipe (les réussites comme les échecs se partagent), le respect et la reconnaissance, la communication franche et constructive et l encouragement à la transparence. Un tel changement de culture prend plusieurs années. Il a été favorisé en 2013 par le lancement de deux programmes de formation et sensibilisation pour les cadres et dirigeants : Good to Gold Ce parcours a pour objectif de privilégier une nouvelle culture visant à l excellence car il ne s agit plus d être simplement bons dans ce que nous faisons. Un des défis de Belgacom consiste dès lors à s améliorer dans la mise en œuvre de ses compétences techniques, dont les qualités intrinsèques sont par ailleurs connues et reconnues. Il ne s agit pas uniquement de disposer d un savoir-faire, mais de pouvoir mettre ce savoir-faire au service des réalisations quotidiennes, au sein des équipes. Dans une volonté d appliquer une approche «du sommet vers la base», le Comité de Direction de Belgacom a été le premier à suivre ce trajet, suivi par un peu plus de 600 leaders en Environ autres le feront au cours de Cette formation originale est donnée par une vingtaine de dirigeants ou collaborateurs à haut potentiel spécifiquement formés pour jouer ce rôle de courroie de transmission dans le processus de transformation. Lead 21 Le programme Lead 21, lancé en 2012, a été étendu à l ensemble des team leaders. Depuis lors, 865 collaborateurs ont déjà suivi cette formation de cinq jours. Le but consiste à garantir que chaque responsable d équipe allie bagage technique et compétences en leadership. L amélioration de celles-ci devient ainsi une source de motivation autant qu un motif de satisfaction professionnelle et personnelle. RESSOURCES HUMAINES 31 BELGACOM RAPPORT D ACTIVITÉS 2013

35 1.257 >> postes vacants ont été comblés en 2013, 394 par des candidats externes et 863 par des évolutions de fonction en interne Des initiatives telles que Good to Gold et Lead 21 s inscrivent dans la durée. Soucieuse de les faire vivre au-delà des formations, Belgacom veille à la mise en pratique, dans chaque division, des principes de leadership appris lors des formations, telle la mise sur pied du «réseau de champions de la culture et du leadership» dans le cadre du parcours Good to Gold. Chaque team leader contribue ainsi durablement à la création d un environnement de travail plus stimulant et motivant. 30 millions >> Belgacom a investi 30 millions EUR dans la formation, soit 3 % de sa masse salariale BELGACOM RAPPORT D ACTIVITÉS 2013 RESSOURCES HUMAINES 32 Un département dédié au support des team leaders En complément des programmes susmentionnés, le département des ressources humaines a créé un «Team leader Solution Center» destiné à l accompagnement et au soutien des responsables d équipe. Ceux-ci peuvent s y adresser pour toutes les questions relatives au bon fonctionnement de leurs teams. Ce département spécifique organise également des sessions de coaching personnalisé ou en groupe, des sessions d information et des ateliers. Ce sont les team leaders, en effet, qui accompagnent et dirigent le personnel au quotidien. Ils constituent donc le moteur du changement que Belgacom entend pousser plus avant. Un environnement de travail plus flexible En matière de nouvelles méthodes de travail, Belgacom entend pratiquer en interne les solutions qu elle vend également à ses clients. La flexibilité de notre entreprise et celle de nos collaborateurs constituent dès lors une priorité. En 2013, nous avons accéléré un certain nombre de processus, regroupés sous le programme baptisé «Flex», afin de rendre nos façons de travailler plus flexibles. Il s agit bien entendu de promouvoir et d encadrer le télétravail et le travail à domicile. Mais il consiste également à fournir les outils qui permettent d évoluer vers un nouvel environnement de travail numérique qui ne soit plus confiné à une chaise et un bureau. Afin de rendre cette transition la plus harmonieuse possible, nos team leaders peuvent suivre une formation en «leadership à distance». Son but : former nos cadres et dirigeants à l utilisation de nouveaux moyens de communication, d accompagnement et de coaching à distance. Des formations spécifiques et concrètes Outre différents programmes axés directement sur le leadership et l adaptation au changement, Belgacom continue à investir dans des formations concrètes pour un grand nombre de collaborateurs. On épinglera, par exemple, les formations «Shop of the Future», qui permettent à nos commerciaux de mieux servir les clients dans nos magasins, ainsi que toute une série de formations techniques de haut niveau pour nos techniciens et ingénieurs. Nous avons également innové avec une formation sur l usage des médias sociaux, ou encore une formation axée sur la gestion de l absentéisme et destinée à augmenter l efficacité globale des équipes. Une culture du dialogue >> Pour stimuler l engagement des collaborateurs et un dialogue ouvert par-delà les clivages hiérarchiques, Belgacom organise depuis dix ans une enquête de satisfaction du personnel. Depuis deux ans, cette enquête ne mesure plus seulement l engagement des collaborateurs, mais aussi l alignement stratégique et l agilité. Chaque année, elle donne lieu à des plans d action concrets visant à apporter les améliorations requises. Cette démarche s est notamment concrétisée, en 2013, par l organisation de sessions de chat interactives avec des membres de la direction et l élaboration d un mode de communication plus ouvert et plus transparent.

36 FOCUS DES COLLABORATEURS EN BONNE SANTÉ La santé d une entreprise est le reflet de celle de ses collaborateurs. Notre programme Vitality repose sur un intranet regroupant une série d initiatives et de conseils pratiques pour mieux bouger et mieux manger, une équipe de collaborateurs chargés de promouvoir toutes les actions «santé» dans l entreprise et une communauté pour échanger idées et propositions. Des mesures d économie indispensables La formation et le développement du personnel restent et resteront des priorités absolues pour Belgacom. Mais l entreprise doit aussi tenir compte d un contexte de marché hyperconcurrentiel. Sous peine de voir s éroder nos marges bénéficiaires et notre compétitivité, nous devons garder nos frais de personnel sous contrôle. Pour réaliser les mesures d économies indispensables, nous disposons de deux leviers : Simplifier pour réduire le volume de travail Nous allons poursuivre nos efforts de simplification de nos lignes de produits et de nos processus internes. Ce travail de simplification, qui constitue l une de nos quatre priorités stratégiques, nous permettra de réduire le volume de travail nécessaire et le remplacement systématique des collaborateurs qui quittent l entreprise. Réorganiser nos structures en préservant la paix sociale Nous ne pourrons éviter une simplification fondamentale de certaines de nos structures. Un effort de flexibilité sera demandé, même si nous privilégierons des transitions en douceur, sans compromettre nos objectifs de développement du capital humain. Comme nous l avons réussi ces dernières années, il sera essentiel de respecter le principe du dialogue social même dans un contexte de marché qui impose des rééquilibrages. Nous mettrons tout en œuvre pour préserver un dialogue constructif avec nos partenaires sociaux, comme ce fut notamment le cas lors de la signature de la convention collective de travail pour Résultats de l enquête Speak Up 2013 Cette année, 72% de nos collaborateurs ont pris part à l enquête du personnel Speak Up qui mesure non seulement le niveau d engagement des employés mais également l alignement stratégique et l agilité, trois piliers qui ont un impact significatif sur le succès de notre entreprise. Les scores sur ces 3 piliers ont progressé par rapport à 2012, surtout au niveau de l engagement et de l alignement stratégique qui se retrouvent alignés ou largement au-dessus du Benchmark Telecom. Une culture d entreprise positive Environ 8 employés sur 10 recommanderaient Belgacom comme une entreprise où il fait bon travailler et recommanderaient également nos produits et services à leurs proches. Cela illustre bien le fait que nos employés sont de réels ambassadeurs pour notre entreprise. Aussi, un nombre croissant de collaborateurs affirment que la reconnaissance fait partie de la culture de l entreprise et qu ils reçoivent davantage de feedback pour les aider à améliorer leurs performances, deux domaines où nous avons observé des progressions d environ 10% par rapport à L agilité comme facteur de changement Enfin, nous avons également observé une belle progression au niveau de la perception de notre capacité à réagir face aux changements. Nos collaborateurs, tout comme la direction de Belgacom, affirment que nous devons continuer nos efforts dans ce domaine pour augmenter davantage l agilité de nos structures et modes de fonctionnement afin de préparer le futur de l entreprise et répondre aux exigences croissantes de nos clients. L agilité constituera donc une priorité centrale pour les années à venir NOS PRIORITÉS EN 2014 Notre stratégie de gestion des ressources humaines s inscrit dans la continuité. Il n y aura donc pas de bouleversement dans nos priorités, mais des mesures d accroissement de notre efficacité. Notre principal défi consistera à maintenir les frais de personnel sous contrôle mais également à mener à bonne fin la transformation de notre culture d entreprise. Notre ambition est de faire de Belgacom une organisation agile et efficace pour lui permettre de renouer durablement avec la croissance. RESSOURCES HUMAINES 33 BELGACOM RAPPORT D ACTIVITÉS 2013

37 >> MARIO, PETER, NICOLAS-XAVIER, OLIVIER, LUC, BRUNO, MARC, WARD ET KOEN GRÂCE À NOS RÉSEAUX ET NOS SOLUTIONS, NOUS AVONS RECONQUIS DE NOMBREUSES ENTREPRISES. >> MICHAEL ET FREYA UN SERVICE ENCORE PLUS SOURIANT ET EFFICACE DANS NOS CENTRES D APPELS. >> MURIEL ET FRÉDÉRIC L OFFENSIVE MOBILE AUPRÈS DES PME.

38 >> GILLES, NADIJE, NATALINA CETTE ANNÉE, BICS A ACHEMINÉ PLUS DE 1,9 MILLIARD DE MESSAGES DANS LE MONDE ENTIER. >> LAURE-EMMANUELLE ET MAUREEN AUJOURD HUI 29 MAGASINS FONT VIVRE UNE NOUVELLE EXPÉRIENCE AU CLIENT. >> DIRK CYCLOCROSS À OOSTMALLE OU GRANDS FESTIVALS, NOS INSTALLATIONS MOBILES DOIVENT TOUJOURS ASSURER. >> ALEXANDRE ET GRÉGORY IMAGINER DE NOUVEAUX PARTENARIATS AVEC LES ACTEURS «OVER-THE-TOP» >> HILDE, PHILIPPE, WALTER ET NICOLAS LE SPORT AU TOP SUR BELGACOM 5, 11 ET 11+ >> JOHAN, PHILIPPE ET LARS UN SERVICE TECHNIQUE ENCORE PLUS PERFORMANT POUR DES CLIENTS ENCORE PLUS SATISFAITS. >> RACHIDA, WESLEY, BART ET CARLY SCARLET, LES SOLUTIONS TÉLÉCOMS SIMPLES ET ACCESSIBLES POUR LES CLIENTS SENSIBLES AU PRIX.

39 >> ILSE, GEERT ET MURIEL BELGACOM, L ENTREPRISE AU SERVICE DE TOUTES LES TRIBUS ;) >> VÉRONIQUE, THIERRY ET KARL DES SYSTÈMES INFORMATIQUES ENCORE PLUS SIMPLES POUR UN MEILLEUR SERVICE AU CLIENT. >> MURIEL ET AMAURY SUPPORTERS DES DIABLES ROUGES...DEPUIS 20 ANS. >> MARINA CHEZ TANGO, NOUS AVONS UN SYSTÈME DE REPORTING QUI NOUS PERMET DE MIEUX CONNAÎTRE NOS CLIENTS ET D ADAPTER NOS OFFRES À LEURS BESOINS. >> CHRISTOPHE ET JORAN DES RÉSEAUX CUIVRE ET FIBRE OPTIQUE TOUJOURS PLUS PERFORMANTS >> DEBEN, EMMANUEL ET LUK VOIR AVEC LES YEUX DU CLIENT C EST AMÉLIORER SON EXPÉRIENCE AU CONTACT DE NOS PRODUITS.

40 >> FILIP, SYLVIANE ET JEAN-CHRISTOPHE TV REPLAY, UNE NOUVELLE FAÇON DE VIVRE LA TÉLÉ. >> SABINE, INGE, CORINNE, GEORGES ET RONALD VERS UN NOUVEL ENVIRONNEMENT DE TRAVAIL «FLEX», À L ÈRE DU NUMÉRIQUE.

41 UNE EXPÉRIENCE UNIQUE POUR CHAQUE CLIENT RÉSIDENTIEL BELGACOM RAPPORT D ACTIVITÉS 2013 CLIENTS 38

42 Pour Belgacom, le progrès technologique n est pas une fin en soi. Il répond aux besoins de liberté, de simplicité et de confort d une clientèle résidentielle très diversifiée. C est pourquoi nous continuons à investir dans nos réseaux fixes et mobiles afin de les rendre toujours plus performants et de pouvoir proposer aux clients des solutions plus intuitives. En 2013, nous avons poursuivi l optimisation d une offre de services dans laquelle chaque particulier peut se retrouver. Sur un marché télécom disputé, particulièrement en matière de téléphonie mobile, Belgacom a recueilli les fruits de sa stratégie de convergence. Celle-ci lui permet de consolider sa position d opérateur unique donnant accès à un vaste éventail de solutions de connectivité et de contenus, depuis différents terminaux fixes et mobiles. Diverses initiatives ont permis à Belgacom de concrétiser sa stratégie de «faire vivre les écrans», partout, tout le temps et en toute liberté. Avec toujours cette volonté de rendre la vie de ses clients plus agréable. L offensive mobile Belgacom a pu démontrer sa rapidité de réaction face à une concurrence féroce, simplifié son offre et adapté ses tarifs au bénéfice du consommateur. En mettant en avant la qualité du réseau Proximus, notre entreprise est une nouvelle fois parvenue à diminuer considérablement le nombre de clients passant à la concurrence. Ce nombre correspond désormais au niveau qui prévalait avant le bouleversement mobile du marché. Le repositionnement de Scarlet, notre marque lowcost, avec une toute nouvelle offre mobile postpaid et prepaid concurrentielle, semble avoir elle aussi permis de fidéliser et de conquérir efficacement les clients sensibles au prix. Ces efforts conjugués nous ont permis de connaître une croissance significative de nos abonnements de téléphonie mobile (postpaid). UNE SEULE FACTURE POUR TOUTE LA TRIBU >> LE CLIENT PEUT AJOUTER JUSQU À 6 ABONNEMENTS MOBILES À SON PACK, EN PROFITANT D UNE RISTOURNE DE 5 À 10 EUR PAR MOBILE. Des Packs avec plus de valeur à un prix attrayant Notre stratégie de convergence trouve un écho positif auprès des consommateurs, comme en témoigne la hausse des ventes de nos Packs Internet Partout. Nos Packs offrent aujourd hui davantage de valeur pour un tarif tout compris attrayant. Nous sommes parvenus à accroître nos revenus moyens par ménage et à consolider notre position d opérateur télécom de confiance pour un nombre croissant de ménages. Nous proposons également à ces derniers des avantages supplémentaires : les clients peuvent combiner jusqu à six abonnements mobiles dans un seul et même Pack et bénéficier ainsi d une ristourne mensuelle de 5 à 10 EUR. TV Partout, notre service permettant au client de regarder la télévision digitale partout et sur n importe quel appareil, est désormais compris dans tous les Packs. Avec Scarlet Trio, nous commercialisons également une solution convergente pour les clients avant tout soucieux de leur budget. CLIENTS 39 BELGACOM RAPPORT D ACTIVITÉS 2013 ÉVOLUTION DU TAUX DE DÉSABONNEMENTS MOBILES (POSTPAID) 10,0% Q1 8,2% 11,8% 33,9% 20,6% 14,8% 13,1% Q2 Q3 Q4 Q1 Q2 Q ,14% Q4 Des marques adaptées aux besoins de chacun En 2013, nos équipes marketing se sont attachées à renforcer les complémentarités entre nos marques : les consommateurs qui recherchent la meilleure expérience mobile auprès de Proximus et ceux en quête de solutions convergentes et d un service de qualité offerts par Belgacom. Fin 2014, notre entreprise réunira toutes les solutions mobiles, fixes et IT sous Proximus comme unique marque commerciale (voir page 17). Nous continuerons ainsi d offrir le service et la fiabilité de Belgacom, combiné avec la qualité et l innovation de Proximus. Quant à Scarlet, elle poursuivra, sous sa propre marque, la commercialisation de solutions simples et accessibles aux consommateurs sensibles au prix.

43 BELGACOM RAPPORT D ACTIVITÉS 2013 CLIENTS 40 Une quête permanente de simplicité La simplicité et la liberté sont également les maîtres mots qui guident l évolution de nos services aux clients. Le support que nous offrons via les Contact Centers et les Belgacom Centers s accompagne de nouvelles possibilités d aide en ligne disponibles sur notre site web Grâce aux e-services et à la rubrique «Aide et support», le client peut rechercher lui-même la réponse à sa question, au moment de son choix, sans devoir se déplacer. Notre site web a d ailleurs enregistré en 2013 une hausse significative du nombre de clients satisfaits. Concevoir de nouveaux services avec le client La confiance des clients est primordiale pour notre entreprise. Nos innovations font à chaque fois l objet de tests approfondis pour garantir une fiabilité et une convivialité maximales. Nous attachons également une grande importance aux réactions de nos clients, ce qui nous a amenés à lancer, en 2013, un certain nombre de services en phase de test. Dans le cas de TV Replay, qui permet de regarder des programmes en différé sans les enregistrer, nous avons organisé en novembre un test auprès des trois principaux groupes de médias flamands : la VMMa, la VRT et SBS Belgium. L initiative a ensuite été étendue aux chaînes du Groupe RTL et du Groupe AB >> Nombre de téléchargements de l application Hello! en 2013 >> TV REPLAY permet de regarder des programmes en différé pendant 36 heures sans les enregistrer. SCARLET SUR LE «LOW COST» >> BELGACOM A RENFORCÉ LA COMPLÉMENTARITÉ ENTRE L OFFRE SCARLET DESTINÉE AUX CLIENTS SENSIBLES AU PRIX ET L ENSEMBLE DE SON PORTEFEUILLE DE PRODUITS. SCARLET A ÉGALEMENT REVU SES FORMULES D ABONNEMENTS MOBILES ET LANCÉ UNE OFFRE CONVERGENTE SCARLET TRIO. Parallèlement, nous avons également lancé en test une solution de cloud destinée aux clients résidentiels. Grâce à Belgacom Cloud, le client dispose d un espace centralisé pour stocker ses photos, ses vidéos, ses documents ou ses contenus musicaux favoris. Il accède partout et en permanence à ces médias et les partage en toute convivialité avec amis et famille, sur son smartphone, son ordinateur portable, sa tablette ou sur Belgacom TV. La confiance passe aussi par une attention constante portée à la sécurité de nos solutions. C est pourquoi nous collaborons, pour les besoins de Belgacom Cloud, avec F-Secure, une entreprise internationale de pointe dans le domaine de la sécurité IT. L expérience client au cœur de nos points de vente Dès que le client pénètre dans un point de vente Belgacom, il doit se sentir bien entouré et y trouver les solutions répondant le mieux à ses besoins. Nous avons étendu notre réseau d Experience Stores à 29 points de vente. Ces magasins modernes et attirants permettent au consommateur de s immerger dans l univers des possibilités offertes par Belgacom. Le client peut aisément tester les produits et bénéficier des conseils de nos équipes de vente. Le client n a plus envie de perdre du temps dans les files d attente. C est pourquoi nous avons mis en œuvre un nouveau système de commande dans les Belgacom Centers, qui accélère le traitement de la commande tout en réduisant considérablement les risques d erreurs. La sécurité des personnes et des biens Il arrive même que la sécurité des biens et des personnes constitue la raison d être de nos produits : début 2013, nous avons lancé Belgacom Home Control, une nouvelle solution permettant au client de savoir, partout et en permanence, ce qui se passe chez lui, via son smartphone, sa tablette ou son PC. L installation, simple et discrète, se compose d une centrale, d une caméra en haute définition, d un détecteur de fumée, de détecteurs de mouvements et de commandes à distance. Depuis novembre 2013, il est même possible de connecter Belgacom Home Control aux services de télésurveillance de Securitas.

44 Succès confirmés de Tango au Luxembourg >> Tango, la filiale luxembourgeoise de Belgacom, a poursuivi le développement de son offre de contenus sur la TV digitale en ajoutant de nouvelles chaînes, une interface germanophone et une offre enrichie à destination de la communauté portugaise. Tango devient ainsi un acteur important sur le marché du divertissement. La stratégie de convergence de Belgacom porte également ses fruits au Grand-Duché, où la TV est combinée dans un Pack Tango. CLIENTS 41 BELGACOM RAPPORT D ACTIVITÉS NOS PRIORITÉS SUR LE MARCHÉ RÉSIDENTIEL PARTENAIRE DES DIABLES ROUGES >> BELGACOM EST UN SPONSOR INCONTOURNABLE DES DIABLES ROUGES. LA CAMPAGNE MÉMORABLE DE QUALIFICATION POUR LE BRÉSIL A ÉTÉ L OCCASION, POUR BELGACOM, DE MENER DES ACTIONS SPÉCIFIQUES AU BÉNÉFICE DE SA MARQUE. >> Notre ambition pour les prochaines années est de renforcer notre position sur le marché belge. Pour y parvenir, notre défi sera double : d une part renouer avec la croissance en proposant des solutions novatrices aux clients et, d autre part, maintenir nos coûts sous contrôle. Nous pourrons ainsi sécuriser les investissements indispensables pour regagner des parts de marché.

45 UN PARTENAIRE UNIQUE POUR NOS CLIENTS PROFESSIONNELS BELGACOM RAPPORT D ACTIVITÉS 2013 CLIENTS 42 Les entreprises sont aujourd hui en quête d un partenaire capable de leur proposer des solutions innovantes et complètes sur lesquelles elles pourront se reposer en toute confiance. Avec Belgacom, elles profitent d une double expertise de fournisseur télécom et de compétences IT de haut niveau. En 2013, non seulement nous sommes parvenus à conserver notre position de leader sur le marché des télécoms mais nous avons également inscrit à notre actif quelques belles réalisations dans le domaine des communications unifiées, du cloud computing et de la sécurité.

46 Belgacom, la référence télécom Pour le client professionnel, la frontière entre besoins télécoms et informatiques est de moins en moins étanche, à l heure où le cloud computing et les applications mobiles sont en plein essor. L indépendant, la PME ou la grande entreprise recherche une solution lui permettant de tirer un bénéfice maximum des nouvelles technologies. Dans ce contexte, la stratégie de convergence de Belgacom s est montrée payante : en 2013, notre entreprise a maintenu son leadership sur son marché télécom traditionnel, malgré les secousses qui ont agité le marché mobile. Les actions entreprises pour conserver nos clients professionnels ont manifestement porté leurs fruits. Le retour de grands clients Belgacom est en outre parvenue à reconquérir de nombreux clients. De grandes sociétés telles que BNP Paribas Fortis et bpost ont choisi de nous faire à nouveau confiance pour leur téléphonie mobile. La qualité de notre réseau et de notre service a été un élément déterminant. Belle croissance sur les marchés de l IT Outre les télécommunications, Belgacom se focalise également sur la fourniture de solutions IT, étroitement complémentaires aux télécoms et qui constitue l autre fondement de sa stratégie. L entreprise a pris le chemin de la croissance sur un marché en stagnation, grâce à une série de beaux projets axés sur une approche centrée «solution» plutôt que sur la seule vente de technologies. Une solution globale pour l agence flamande des routes et de la circulation Un bel exemple est le contrat-cadre décroché auprès de l agence flamande des routes et de la circulation (Agentschap Wegen en Verkeer), dans le cadre d un projet de reconnaissance automatique des plaques d immatriculation. Ce contrat est un excellent exemple des atouts que Belgacom peut combiner. En collaboration avec nos partenaires, nous allons en effet fournir une solution globale pour coupler la connectivité et l infrastructure (notam- FOCUS CONTRAT HISTORIQUE POUR TELINDUS LUXEMBOURG >> En collaboration avec Belgacom, Telindus Luxembourg a terminé l année 2013 par la signature du projet le plus important de toute son histoire. Elle a en effet conclu un partenariat avec IBM en qualité de sous-traitant pour les infrastructures de télécommunications et de stockage. Cet accord fera de Telindus Luxembourg un partenaire stratégique pour Innovative Solutions for Finance (IS4F), ancienne entité du Groupe Dexia sous l acronyme ADTS. Telindus fournira ainsi ses services aux clients de IS4F, parmi lesquels Belfius Assurances, Belfius Bank, Banque International à Luxembourg (BIL), Dexia Credit Local S.A., Dexia S.A. et International Wealth Insurers (IWI). Partenaire de longue date d ADTS, Telindus Luxembourg peut se prévaloir d une vaste expérience en matière de sous-traitance. Le partenariat avec Belgacom offre une bonne couverture aux différents clients belges et luxembourgeois d IS4F. >> TELINDUS LUXEMBOURG A CONCLU UN PARTENARIAT AVEC IBM EN QUALITÉ DE SOUS-TRAITANT POUR LES INFRASTRUCTURES DE TÉLÉCOMMUNICATION ET DE STOCKAGE. 701millions >> 701 millions EUR de revenus IT, soit 1,3% de plus qu en 2012 ment les caméras) au logiciel de reconnaissance de plaques d immatriculation. Cette solution aidera également les services de police de la route à mener à bien leurs missions de prévention et de répression, en facilitant notamment l analyse du trafic. Elle favorisera aussi l échange de données au niveau local, régional et national. Le contrat-cadre signé entre Belgacom et l Agentschap Wegen en Verkeer permettra d exporter le service dans toutes les villes et communes flamandes. Les villes de Brecht et Brasschaat seront pionnières de ce projet. Nouvelle percée des services de cloud Il y a deux ans, Belgacom lançait Becloud. Cette offre constitue l épine dorsale de notre stratégie visant à proposer des solutions IT simples et intuitives. L «IT as A Service» offre de multiples avantages, parmi lesquels la prédictibilité des coûts. Le client ne paie que pour les services ou les espaces de stockage qu il utilise réellement. Belgacom a par ailleurs étendu sa gamme de services d infrastructure (stockage, hébergement, back-up) et de logiciels applicatifs (bureautique, outils collaboratifs, etc.) à travers un modèle de tarification à l utilisation. Ces services sont en rapide progression. Nos investissements ont déjà généré une belle croissance, tant en termes de revenus que de nombre de clients hébergés dans le cloud. Preuve s il en est que ce type de solution répond à un besoin réel de la part de nombreuses entreprises. +12% >> Évolution de nos revenus cloud pour l année 2013 CLIENTS 43 BELGACOM RAPPORT D ACTIVITÉS 2013

47 Des réponses adaptées au monde du travail La technologie d aujourd hui permet d évoluer vers de nouvelles façons de travailler et de collaborer. Les entreprises veulent des solutions qui favorisent la flexibilité tout en garantissant un cadre fiable et sécurisé. Belgacom a clairement choisi, pour ses propres collaborateurs, ces nouveaux modes de travail plus ouverts et flexibles et peut donc partager son expertise avec ses clients. Son offre de plus en plus riche et diversifiée lui permet également de proposer une large palette d outils de connectivité, communication et collaboration. De moins en moins liées à un bureau physique, ces nouvelles manières de travailler représentent d intéressantes opportunités de croissance pour Belgacom. L exemple de Henri Essers La société Henri Essers constitue un bel exemple de cette nouvelle manière de travailler. Fondée en 1928, elle est devenue aujourd hui l un des premiers acteurs européens dans le domaine du transport et de la logistique, notamment pour le secteur chimique et pharmaceutique. Au cours des dix dernières années, elle a connu une croissance rapide, grâce notamment à quelques rachats stratégiques à l échelle internationale. En collaboration avec Henri Essers, Belgacom s est mise en quête de solutions boostant la productivité tout en favorisant une collaboration plus efficace entre les collaborateurs actifs dans différentes implantations. Le choix s est porté sur une solution basée sur Microsoft Lync et combinée à la connectivité et à des fonctionnalités telles que la vidéo intégrée et des applications de centre de contact. La gestion centralisée et l intégration poussée avec d autres applications Microsoft, telles qu Office, SharePoint, Outlook, CRM et System Center, ont joué un rôle décisif, conclut notre client. BELGACOM RAPPORT D ACTIVITÉS 2013 CLIENTS 44 Eric Bluart Taxi Eric Compagnie de taxis Christel Vansimpsen Sint-Lucie Culture de cresson Fred Dumont Les Collines à Domicile Traiteur et livraison FOCUS DES SOLUTIONS CONVERGENTES TAILLÉES POUR LES PME Les indépendants et les PME sont particulièrement sensibles à l attrait de nos solutions globales combinant téléphonie fixe, téléphonie mobile et solutions informatiques. En 2013, le pourcentage de PME ayant opté pour de telles offres combinées a augmenté de plus de 10%. À la fin août, Belgacom avait vendu son e Bizz Pack, une offre «tout-en-un» incluant téléphonie fixe et mobile, internet mobile, outils collaboratifs et services de back-up dans le cloud. >> Les Agisseurs À travers sa campagne publicitaire «Les Agisseurs», Belgacom se profile comme un partenaire pour aider les PME à atteindre leurs objectifs commerciaux. Ses solutions technologiques leur font gagner du temps et leur permettent de se consacrer pleinement à leurs métiers. La première phase de la campagne a permis d exposer de façon attrayante 15 défis professionnels de petites entreprises issues de secteurs divers. Dans une seconde phase, de novembre 2013 à novembre 2014, ces entreprises expliqueront comment Belgacom les a effectivement aidées à relever leurs défis. Les réactions recueillies par Belgacom tout au long de cette campagne innovante lui permettront d améliorer son approche spécifique des besoins des PME et indépendants. L idée est également de partager des expériences et bonnes pratiques avec le monde des PME. >> Belgacom a choisi, pour ses propres collaborateurs, de nouveaux modes de travail plus ouverts et flexibles et peut donc partager son expertise avec ses clients.

48 Une demande croissante en produits de sécurité de qualité Le niveau de complexité des cyberattaques et des intrusions dans les systèmes ne cesse de se renforcer. Belgacom ellemême en a fait l expérience et n a pas manqué d en tirer les enseignements (lire page 27). Cette réalité exige des compétences en sécurité de plus en élevées. À la fois acteur télécom et IT, Belgacom a l avantage de pouvoir proposer des services de sécurité globaux. Notre Security Operations Center (SOC) surveille plus de 400 millions d incidents de sécurité par jour et contrôle 24 heures sur 24 les systèmes de nos clients. Un nombre croissant d entreprises font appel à cette expertise unique et confient à Belgacom le soin de veiller à leur sécurité. Elles évitent ainsi des investissements coûteux en équipements ou le recrutement d experts en sécurité, très recherchés sur le marché. Elles ont la garantie que Belgacom veille sur l ensemble de leurs données et applications, autant sur site que dans le cloud. Des innovations dans l internet mobile Sixdots, la référence en matière de paiement mobile Belgacom investit depuis plusieurs années dans des solutions sectorielles, par exemple dans le domaine des soins de santé ou dans celui du transport. Le but est de générer de nouvelles opportunités pour les clients professionnels tout en facilitant la vie des consommateurs. En 2013, Belgacom s est alliée à la banque BNP Paribas Fortis pour lancer un portefeuille virtuel mobile visant entre autres à simplifier les paiements dans le secteur du commerce. L application Sixdots, entre-temps soutenue par d autres banques de renom, permettra aux consommateurs de payer des produits et services à l aide de leur smartphone, d échanger des bons de réduction virtuels ou encore de centraliser leurs cartes de fidélité. Chaque paiement est sécurisé par un code secret à six chiffres (d où le nom Sixdots). Le lancement commercial de Sixdots, par le biais de la coentreprise Belgian Mobile Wallet s.a., est prévu pour le printemps FOCUS +43% >> Progression en 2013 des revenus générés par nos solutions de sécurité à destination des entreprises. UN CENTRE DE DONNÉES ÉCOPERFORMANT En avril 2013, Belgacom a inauguré à Bruxelles un nouveau centre de données à la pointe en matière de performance énergétique. Ce nouveau centre de données a une superficie de m², ce qui correspond à une extension de 19 % de la superficie totale dont Belgacom dispose dans ses centres de données ( m²). Le centre de données est géré de manière à respecter l environnement et à limiter la consommation d énergie. Il est conçu suivant les principes de séparation des circuits d air froid et d air chaud, des installations de refroidissement puissantes et de l utilisation efficace de l énergie. Les entreprises clientes peuvent donc y héberger des serveurs/équipements à forte consommation énergétique. À l instar des autres centres de données de Belgacom, le nouveau centre de données dispose de la certification ISO Tier-III+. En d autres termes, ces centres de données offrent une fiabilité d entreprise de 99,99 % grâce à une alimentation électrique entièrement redondante par le biais de générateurs de secours dynamiques et un système de réfrigération équipé d une réserve de capacité. CLIENTS 45 BELGACOM RAPPORT D ACTIVITÉS 2013 Le parking sans souci avec Mobile-for Mobile-for, la filiale de Belgacom spécialisée dans les solutions de paiement et tickets de parking mobiles, a connu une impressionnante croissance en Mobile-for récolte ainsi les fruits d accords de gestion de tickets de parking par GSM dans 22 villes en Belgique, d un partenariat avec De Lijn pour l émission électronique des titres de transport, ou encore de solutions innovantes pour le paiement des recharges de véhicules électriques (actuellement, plus de 100 points de chargement sont compatibles avec la technologie Mobile-for). En 2013, Mobile-for a géré plus de 6 millions de paiements de tickets de stationnement par GSM. Cette filiale a l ambition de devenir, à l échelle nationale et internationale, le partenaire par excellence des acteurs de la mobilité au sens large.

49 BELGACOM RAPPORT D ACTIVITÉS 2013 CLIENTS 46 UNE EXPERTISE APPRÉCIÉE À L INTERNATIONAL Belgacom dispose de compétences de pointe reconnues à l international. A travers la coentreprise BICS, Belgacom fournit en tant que grossiste ( carrier ) toute une série de solutions télécoms à plus de 700 opérateurs dans le monde entier. BICS est en effet un leader très apprécié, tant pour ses services de connectivité pour la voix et les données mobiles que pour ses solutions innovantes à valeur ajoutée. Une première mondiale En 2013, BICS, une coentreprise entre Belgacom, Swisscom et MTN, a été l acteur d une première mondiale : le lancement du roaming LTE (4G) entre l Europe, l Asie, l Amérique du Nord et l Afrique. Dans le monde entier, presque 250 opérateurs ont déjà lancé la 4G et veulent offrir à leurs clients un accès data à grande vitesse de haute qualité. Leur offrir cette même expérience dans le monde entier leur demande d établir des connexions avec tous les autres réseaux 4G et c est là que se situe l expertise de BICS. Sa mission consiste à assurer le bon acheminement de tout type de communication à travers les différents réseaux à l échelle internationale. Les services proposés par BICS (voix, messages, roaming, etc.) constituent en quelque sorte l interface centrale entre plusieurs centaines d opérateurs partout dans le monde. 28 milliards >> de minutes traitées en 2013 (+ 3,4% par rapport à 2012) 26% >> des revenus du groupe Belgacom

50 Progression du trafic voix sur un marché en déclin A contre-courant d un marché voix en recul au niveau mondial, BICS est parvenu à transporter davantage de volumes en communications vocales. L érosion globale du marché voix est un défi autant qu une opportunité. Le fait que certains concurrents en difficulté abandonnent leurs activités permet aux opérateurs plus solides d augmenter leurs parts de marché. Ceci combiné avec un focus continu ainsi que des investissements constants dans la diversification de son portefeuille font que BICS est parvenue à s imposer comme «interlocuteur unique» de nombreux opérateurs transnationaux. L entreprise fait ainsi figure de «hub» privilégié, particulièrement en Europe, en Afrique, au Moyen Orient et en Asie. BICS peut en outre compter sur un degré de satisfaction élevé parmi ses clients. Rachats et accords stratégiques En octobre 2013, BICS a acquis Aervox, une société de développement de logiciels basée à Madrid, spécialisée dans le domaine de l itinérance et de la messagerie. L acquisition d Aervox s inscrit ainsi dans une stratégie qui vise à développer de nouvelles fonctionnalités et des solutions d interopérabilité dans le domaine des données mobiles. Fin décembre, BICS a aussi annoncé l intégration des activités pour les transferts d argent internationaux via GSM dans un joint-venture constitué de Mastercard, eservglobal et BICS. Cette nouvelle société permettra aux utilisateurs d envoyer de l argent de et vers un compte mobile, des cartes de paiement, des comptes en banque ainsi que des bureaux de change, quel que soit l endroit où ceux-ci ou les destinataires se trouveront. BICS est également très attentive aux évolutions de marché induites par l arrivée de nouveaux acteurs «over the top», en provenance du monde du web. La filiale de Belgacom continue ainsi, à travers des partenariats fructueux, à faire progresser sa pénétration dans le marché OTT. 1,666 milliard >> 1,666 milliard EUR de revenus en 2013 (+1,3% par rapport à 2012) 8% >> de la rentabilité (EBITDA) du groupe >> BICS EST PARVENUE À S IMPOSER COMME «INTERLOCUTEUR UNIQUE» DE NOMBREUX OPÉRATEURS TRANSNATIONAUX. RÉSULTATS DE L ENQUÊTE DE SATISFACTION DE BICS EN 2013 EXTRÊMEMENT SATISFAIT 13% TRÈS SATISFAIT 64% MODÉRÉMENT SATISFAIT 19% ASSEZ SATISFAIT 4% Nouveaux services à valeur ajoutée Aujourd hui, satisfaire le client et faire face à la pression sur les revenus de roaming est une réalité pour les opérateurs. A cet égard, BICS s est distinguée en 2013 par le lancement de SMART Webvision. Il s agit d une application web d analyse et de monitoring, de type big data, qui permet aux opérateurs de roaming en 2G, 3G et 4G de suivre les flux de communications en temps réel. Les opérateurs peuvent le cas échéant apporter des adaptations nécessaires pour améliorer l expérience de leurs propres clients en roaming ainsi que leur proposer des offres sur mesure. Nos priorités pour l avenir BICS évolue sur un marché mondial très concurrentiel, qui requiert un très haut niveau d expertise. Elle est de ce fait à la recherche constante de talents techniques très demandés, possédant des compétences spécifiques. La qualité de ses équipes et de ses technologies doit permettre à BICS de garder une longueur d avance sur ses concurrents et accélérer le déploiement de nouveaux services à valeur ajoutée, complémentaires à son offre éprouvée de services de carrier. CLIENTS 47 BELGACOM RAPPORT D ACTIVITÉS 2013

51 DES MOYENS FINANCIERS GÉRÉS PLUS EFFICACEMENT BELGACOM RAPPORT D ACTIVITÉS 2013 FINANCE 48 En 2013, les bouleversements dans le paysage mobile se sont pleinement fait sentir, augmentant la pression sur les revenus et la rentabilité. Belgacom est néanmoins parvenue à limiter l impact de la destruction de valeur en adoptant une réaction commerciale appropriée. La simplification et la gestion de notre structure de coûts sont toutefois essentielles si nous voulons rester leaders sur le marché et développer notre stratégie de croissance. Belgacom s est lancée ces dernières années dans un vaste programme d optimisation de ses coûts. Ces efforts ont déjà porté leurs fruits mais devront être intensifiés à l avenir. La priorité est à présent de poursuivre cette transformation et d amplifier les mesures destinées à simplifier produits et processus (lire page 20). L entreprise progresse ainsi sur la voie d une culture du changement et de l efficacité. Le programme Wings, lancé en 2011, vise l efficacité opérationnelle, ou plus simplement l optimisation de chaque dépense réalisée par l entreprise. Déjà solidement ancré dans l organisation, ce vaste plan s articule autour de trois axes :

52 +80 >> Plus de 80 mesures ont été prises à tous niveaux pour rationaliser notre portefeuille de produits, changer notre mode de fonctionnement et accroître notre efficacité Gagner en efficacité Plus de 80 mesures ont été prises à tous niveaux pour rationaliser notre portefeuille de produits, changer notre mode de fonctionnement et accroître notre efficacité. La plupart de ces mesures privilégient la création de synergies entre les départements. Belgacom entend procurer au client une expérience irréprochable, du début à la fin de chaque contact avec l entreprise. Les équipes en charge des ressources humaines et des systèmes informatiques jouent à cet égard un rôle crucial de facilitateur. En effet, un modèle d entreprise plus collaboratif implique une culture de la performance et du changement partagée par tous les collaborateurs, ainsi que des systèmes informatiques bien huilés et interconnectés. Des gains d efficacité substantiels ont été réalisés par la mise sur pied de centres de service partagés qui regroupent un certain nombre de tâches administratives, l optimisation des canaux de vente, le regroupement et la renégociation des contrats d outsourcing pour les centres d appels, l optimisation du travail en équipe dans certains services techniques ou encore la rationalisation du parc de véhicules utilitaires en fonction des besoins réels. Mieux acheter Belgacom s est engagée dans un programme global de révision de sa politique d achats et d approvisionnements (sourcing). Notre principe : acheter mieux, moins et moins cher. Il s agit non seulement de négocier les meilleurs prix, mais aussi de mettre en place un système d achat, avec la collaboration étroite des services financiers et des départements opérationnels pour créer davantage de valeur. Ce partenariat se manifeste par ailleurs du côté de la demande : limiter les achats en réduisant le gaspillage, par exemple grâce à de nouveaux outils prévisionnels performants. Gérer plus efficacement la demande au sein des départements opérationnels permet de revoir l adéquation entre le niveau de valeur et les exigences spécifiques. Il s est avéré que pour certaines fournitures, il était tout à fait possible de revoir les exigences fonctionnelles ou techniques pour obtenir des prix moindres, sans compromettre le niveau de service pour le client ou l utilisateur final. Il n est par ailleurs nullement question de remettre en cause les normes et principes écologiques et éthiques intégrés à nos cahiers des charges. Comme nous l expliquons dans notre chapitre «Créer de la valeur et la partager», notre responsabilité sociétale se reflète également dans notre politique d achats. Les contrats passés auprès de nouveaux fournisseurs dans des pays dits à moindre coût intègrent tous des critères de qualité intrinsèque autant que de respect de valeurs éthiques. Priviligier la valeur Améliorer notre connaissance du client et prendre les mesures adéquates tout au long de son cycle de vie sont des manières importantes de diriger l entreprise en termes de valeur. Une segmentation affinée nous a permis de mieux calibrer nos offres, en fonction des moments importants de la vie du client, son degré de sensibilité au prix ou sa préférence pour un service aussi complet et qualitatif que possible. Cette mise en œuvre nous a aidés à optimiser nos moyens financiers et à lier nos coûts d acquisition, de développement et de rétention avec la création de valeur. Il s agit de changer d orientation par rapport à ces dernières années, où la valeur était essentiellement basée sur les volumes et l augmentation de la base client. Notre approche des canaux de vente a également été repensée, de façon à mieux les rentabiliser et orienter le client vers le canal qui lui convient le mieux. Nous incitons le client à utiliser les services internet et self-service pour commander des produits de base ou trouver une réponses à ses questions, tandis qu il peut compter sur un service personnalisé dans les points de vente Belgacom pour des transactions de plus grande valeur. L évolution vers une culture de management axée sur la valeur nécessite l implication de tous les chefs d équipe. C est pourquoi nous organisons régulièrement des sessions de sensibilisation pour expliquer en quoi consistent la création et la gestion de valeur et quels en sont les objectifs. Accroître la confiance en l avenir Le vaste programme d efficience de Belgacom est désormais intégré au cœur des différents départements opérationnels, qui en sont maintenant le relais et jouent pleinement leur rôle de moteur de transformation. Nous sommes convaincus que cette stratégie est porteuse d avenir. Nos gains d efficacité nous permettent en effet de continuer à investir dans les réseau pour offrir le meilleur service possible à nos clients et générer une croissance durable. AMÉLIORATIONS DE L EFFICACITÉ >> 80+ mesures d efficacité >> Optimisation des leviers structurels pour créer des synergies entre les départements >> Facilitateurs cruciaux pour HR et IT NOTRE AMBITION : SOUTENIR NOTRE STRATÉGIE DE CROISSANCE PAR L EFFICACITÉ SOURCES DE VALEUR >> Acheter mieux, moins et moins cher >> Collaboration entre départements pour créer d avantage de valeur >> Focus sur l impact en matière de résultats (P&L) GESTION BASÉE SUR LA VALEUR >> Outils de gestion de la création de valeur >> Principe de gestion basé sur la valeur FINANCE 49 BELGACOM RAPPORT D ACTIVITÉS 2013

53 L ACTION BELGACOM BELGACOM RAPPORT D ACTIVITÉS 2013 L ACTION BELGACOM 50 Depuis mars 2004, les actions Belgacom sont cotées à la Bourse Euronext de Bruxelles sous le symbole BELG. L action Belgacom est notamment reprise dans les grands indices suivants : BEL20, indice STOXX Europe 600 Telecommunications, STOXX Europe 600, Bloomberg Europe Telecommunications et FTSE Eurofirst 300. Performance de l action Belgacom 2013 a été une bonne année pour l ensemble du secteur des télécoms. Par rapport au marché global (hausse de 17,4 % de l indice SXXP en glissement annuel), le secteur a enregistré une hausse des performances de l ordre de 14,7 p.p. (progression de 32,1 % de l indice SXKP en glissement annuel). En outre, le BEL20 a clôturé l année 2013 sur une hausse de 18,1 % par rapport à fin Cette performance sectorielle exceptionnelle est due pour une large part à une amélioration du sentiment autour de la régulation et par la vente par Vodafone à Verizon de ses participations dans cette dernière, créant des espoirs de consolidation accrue dans l ensemble du secteur. En comparaison avec cette performance sectorielle exceptionnelle, l action Belgacom a connu une année plus difficile. En cause, la guerre des prix dans le domaine mobile, qui s est amorcée fin 2012, mais a continué à produire ses effets en L action Belgacom a clôturé l année 2013 sur un recul de 3,15 % par rapport à fin 2012, clôturant à 21,55 EUR au 31 décembre Entre-temps, le volume moyen des échanges a augmenté de 34 %. L action a atteint son cours de clôture le plus élevé de l année à 23,25 EUR le 9 janvier 2013 et son niveau le plus bas le 22 juillet 2013 avec un cours de clôture à 16,32 EUR a connu un départ relativement stable, en prélude au coup d envoi de la saison des rapports télécoms. Avec l annonce des résultats de 2012, le marché a manifesté une certaine déception face aux perspectives de Belgacom pour Cette tendance à la baisse s est poursuivie en mars, la perte de visibilité sur le marché mobile belge accentuant l incertitude. L action Belgacom a été cotée ex-dividende le 23 avril Les résultats du premier trimestre ont reçu un accueil favorable, mais le marché a continué à redouter les risques comptables liés aux révisions des tarifs. Dans l attente des résultats du deuxième trimestre, le mois de juin est apparu stable. Ce calme s est confirmé en juillet, COTATION DE L ACTION Nom Terme Marché boursier : Premier marché d'euronext Brussels Symbole : BELG ISIN : BE Code national SVM : Code Bloomberg : BELG BB Code Thomson : BELG-BT Code Reuters : BCOM

54 PERFORMANCE DE L ACTION BELGACOM EN 2013 PAR RAPPORT AU BEL20, AU STOXX EURO TELECOM 600 (SXKP) ET AU STOXX EURO 600 (SXXP) (source: Thomson One) PERFORMANCE DE L ACTION BELGACOM EN 2013 PAR RAPPORT À SES PAIRS PARMI LES OPÉRATEURS HISTORIQUES EUROPÉENS Pression liée à la guerre des prix dans le mobile 15 02/01 02/02 02/03 02/04 02/05 02/06 02/07 02/08 02/09 02/10 02/11 02/12 BEL 20 repondéré SXXP repondéré BELG-BT : cours de clôture SXKP repondéré (source: Thomson One) 8 02/01 02/02 02/03 02/04 02/05 02/06 02/07 02/08 02/09 02/10 02/11 02/12 HTO repondéré DTE repondéré TLSN repondéré TDC repondéré TEL repondéré SCMN repondéré TEF repondéré ORA repondéré TIT repondéré BELG cours de clôture Signe de stabilisation dans le Mobile & espoir de consolidation TKA repondéré PTC repondéré KPN repondéré mais des turbulences causées par un avertissement sur résultats et une suspension du dividende par un concurrent de Belgacom ont fait chuter l action Belgacom à son cours de clôture le plus bas en L action Belgacom a toutefois soulagé le marché par ses exceptionnels résultats du deuxième trimestre et n a pas tardé à reprendre pied. Outre des signes de stabilisation sur le marché mobile belge, le principal moteur de ce rétablissement du cours a été la nouvelle, en septembre, de la vente par Vodafone à Verizon Communications Inc. de sa participation de 45 % dans Verizon Wireless. Cette nouvelle, combinée à des signes d intérêt aux États-Unis pour les entreprises télécoms européennes, a encore renforcé la conviction que la consolidation du marché européen des télécoms allait enfin s amorcer. Cette reprise a ensuite marqué le pas du fait de résultats décevants au troisième trimestre, conformes aux prévisions, et de nouvelles craintes de guerre des prix dans le secteur mobile en octobre. En novembre, toutefois, la hausse du cours de l action s est poursuivie et Belgacom a acquis le spectre de 800 Mhz au prix minimum ce même mois. Enfin, le 3 décembre, Belgacom a été cotée ex-dividende intérimaire, mais l accueil positif réservé à un afflux de nouvelles macro-économiques a permis de compenser cette situation avant la fin de l année. L action Belgacom a ainsi finalement terminé l année 2013 sur une baisse de 3,15 % par rapport à l année précédente. L ACTION BELGACOM 51 BELGACOM RAPPORT D ACTIVITÉS 2013 PERFORMANCE DE L ACTION BELGACOM Info sur l action Cours le plus haut 28,65 29,11 27,64 24,60 23,25 Cours le plus bas 21,67 24,31 21,40 20,80 16,32 Cours au 31 décembre 25,32 25,13 24,24 22,21 21,55 Volume annuel de transactions (en nombre d'actions) Volume moyen de transactions par jour (en nombre d'actions) Nombre d'actions en circulation Nombre moyen pondéré d'actions en circulation Chiffres clés par action rapportés EBITDA 1 6,14 7,56 5,93 5,55 5,33 Bénéfice net (part du Groupe) 1 2,82 3,94 2,36 2,24 1,98 Dividende ordinaire (brut) 1,68 1,68 1,68 1,68 1,68 Dividende intérimaire (brut) 0,40 0,50 0,50 0,81 0,50 Rendement sur dividende brut 2 8,2% 8,7% 9,0% 11,2% 10,1% Ratio cours/bénéfice au 31 décembre 2 8,98 6,37 10,26 9,94 10,90 Chiffres clés par action, éléments non récurrents exclus EBITDA 1 6,10 6,18 5,97 5,61 5,37 Bénéfice net (part du Groupe) 1 2,79 2,57 2,41 2,29 2,02 Ratio cours/bénéfice au 31 décembre 2 9,09 9,79 10,06 9,68 10,65 Capitalisation boursière au 31 décembre (en milliards EUR) 3 8,12 8,08 7,70 7,07 6,87 1 Sur base du nombre moyen pondéré d actions en circulation 2 Sur base du dernier cours de l année respective 3 Calcul basé sur le nombre d actions en circulation & le dernier cours de l année respective 4 Chiffres clés par action basés sur les chiffres 2012 révisés

55 BELGACOM RAPPORT D ACTIVITÉS 2013 L ACTION BELGACOM 52 Nos actionnaires Situation au 31 décembre 2013 Le principal actionnaire de Belgacom est l État belge, qui détient 53,5 % des actions de Belgacom. Fin 2013, Belgacom détenait 5,6 % de ses actions propres. L actionnariat flottant représente 40,9 %. Près d un quart de cet actionnariat flottant est détenu par des investisseurs individuels, le reste étant essentiellement aux mains d actionnaires institutionnels. Les principaux actionnaires institutionnels de Belgacom se trouvent aux États-Unis et au Royaume-Uni, suivis par la Belgique et l Allemagne. Fin 2013, Belgacom détenait actions propres, soit 5,6 % de l ensemble des actions. Au cours de l année 2013, actions propres ont été utilisées dans le cadre d un plan d achat d actions avec décote proposé à la direction de Belgacom et options ont été exercées. Les droits de vote liés aux actions de trésorerie sont suspendus par la loi. Les droits de dividende relatifs aux actions propres acquises en 2004 sont également suspendus. Quant aux droits de dividende liés aux actions acquises à partir de 2005, ils ont été supprimés. La loi belge interdit aux sociétés de détenir plus de 20 % de leurs actions en circulation. ACTIONS INSTITUTIONNELLES PAR LOCALISATION 22% ETATS-UNIS 20% ROYAUME-UNI 11% BELGIQUE 10% ALLEMAGNE 8% SCANDINAVIE 6% FRANCE 5% PAYS-BAS 11% RESTE DU MONDE 7% RESTE DE L EUROPE (source : analyse des actionnaires, septembre 2013) SITUATION AU 31 DÉCEMBRE 2013 Structure d'actionnariat nombre d'actions % actions % droits de vote % droits de dividende Etat belge ,5% 56,7% 55,9% Belgacom actions ,6% 0,0% 1,3% propres Flottant ,9% 43,3% 42,8% TOTAL ,0% 100,0% 100,0% EVOLUTION DES ACTIONS PROPRES Situation au 31 décembre Options exercées pendant Discount Purchase Plan des employés Situation au 31 décembre Déclarations de transparence Conformément aux statuts de Belgacom, les seuils déclenchant l obligation de notification des participations ont été fixés à 3 % et à 7,5 %, en plus des seuils légaux de 5 %, ou tout multiple de 5 %. Le 20 mars 2013, BlackRock Inc. a fait savoir que sa participation dans Belgacom S.A. avait dépassé le seuil des 3 %. Avec actions Belgacom en sa possession au 15 mars 2013, BlackRock Inc. détient une participation de 3,05 % des actions avec droits de vote émises par Belgacom S.A. Le 9 avril 2013, BlackRock Inc. a fait savoir à Belgacom S.A. que depuis le 4 avril 2013, sa participation en actions avec droits de vote émises par Belgacom S.A., dont le montant total s élève à actions, était passée sous le seuil des 3 %. Le 13 mai 2013, BlackRock Inc. notifiait à Belgacom S.A. : >> un achat d actions avec droits de vote à la date de transaction du 6 mai 2013, portant à 3,00 % sa participation en actions avec droits de vote émises par Belgacom S.A., dont le montant total s élève à Avec actions en sa possession, BlackRock atteignait donc à nouveau le seuil des 3 % ; >> une vente d actions avec droits de vote le 7 mai 2013, ramenant à nouveau la participation de BlackRock sous le seuil des 3 %. Le 5 novembre 2013, BlackRock Inc. notifiait à Belgacom S.A. : >> un achat d actions avec droits de vote à la date de transaction du 31 octobre 2013, portant à 3 % sa participation en actions avec droits de vote émises par Belgacom S.A., dont le montant total s élève à Le 31 octobre 2013, BlackRock Inc. détenait actions, soit 3,00 % du total d actions de Belgacom. Le 2 décembre 2013, BlackRock Inc. notifiait à Belgacom S.A. : >> une vente d actions avec droits de vote le 7 novembre 2013, ramenant la participation de BlackRock sous le seuil des 3 % ; >> un achat d actions avec droits de vote à la date de transaction du 8 novembre 2013, portant à 3,01 % sa participation en actions avec droits de vote émises par Belgacom S.A., dont le montant total s élève à Avec actions

56 en sa possession, BlackRock détenait donc à nouveau une participation supérieure au seuil de 3 % ; >> une vente d actions avec droits de vote le 26 novembre 2013, ramenant à nouveau la participation de BlackRock sous le seuil des 3 %. Le 11 décembre 2013, BlackRock Inc. notifiait à Belgacom S.A. : >> un achat d actions avec droits de vote à la date de transaction du 6 décembre 2013, portant à 3,00 % sa participation en actions avec droits de vote émises par Belgacom S.A., dont le montant total s élève à Avec actions en sa possession, BlackRock atteignait donc une nouvelle fois le seuil des 3 %. Belgacom S.A. détient actions propres, soit 5,6 % du nombre total d actions en circulation. L État belge détient pour sa part actions, soit 53,5 % du nombre total d actions en circulation. À la connaissance de Belgacom, aucun autre actionnaire ne détenait, à la date du 31 décembre 2013, 3 % ou plus des actions Belgacom en circulation. Conformément à la loi du 2 mai 2007 ou aux statuts de Belgacom, les participations importantes doivent être communiquées à : >> FSMA (ex- CBFA) à l adresse trp.fin@fsma.be >> Belgacom à l adresse investor.relations@belgacom.be Relations avec les investisseurs Le département Belgacom Investor Relations (IR) a pour mission de fournir à intervalles réguliers une communication transparente aux investisseurs belges et internationaux. Le Groupe entend assurer, grâce à un dialogue transparent et cohérent avec les investisseurs et les analystes financiers, un montant équitable de l action basé sur des informations financières de première qualité. Soucieux d informer en permanence les actionnaires actuels et potentiels de Belgacom, les dirigeants de l entreprise s adressent régulièrement à la communauté financière. Chaque présentation des résultats trimestriels est suivie d une conférence téléphonique ou d une présentation aux investisseurs/analystes faisant la part belle au jeu des questions-réponses. Deux fois par an, dans la foulée des résultats annuels et semestriels, Belgacom organise avec ses hauts dirigeants un roadshow couvrant les principaux centres financiers d Europe et des États-Unis. De plus, Belgacom participe à plusieurs grandes conférences internationales d investissement. Entre ces événements, des réunions et des conférences téléphoniques sont organisées avec la haute direction. Dans toutes ces activités, la direction est soutenue par l équipe d Investor Relations (IR). L équipe Belgacom IR fournit chaque jour un soutien aux actionnaires privés et institutionnels ainsi qu aux analystes de courtage. Une période fermée est observée quatre semaines avant la publication du rapport trimestriel et six semaines avant l annonce des résultats annuels. Rémunération des actionnaires Politique de rémunération des actionnaires Belgacom s engage à appliquer une politique de rémunération des actionnaires attrayante en distribuant, en principe, la majeure partie de son cash-flow libre (2) annuel à ses actionnaires. Toute distribution de cash-flow libre par le biais de dividendes ou de rachats d actions sera analysée sur une base annuelle. Le but est de maintenir une flexibilité financière stratégique en vue de garantir la croissance future, de manière organique ou par le biais de fusions et d acquisitions sélectives, en mettant clairement l accent sur la création de valeur. Les niveaux appropriés des réserves distribuables seront également confirmés. La politique de rémunération des actionnaires est basée sur un nombre d hypothèses concernant l évolution future du marché et des activités. Elle est sujette à modification en cas de risques ou d événements imprévus échappant au contrôle de l entreprise. Rémunération des actionnaires pour l exercice 2013 Conformément à l engagement susmentionné, le Conseil d Administration a approuvé en octobre 2013 le paiement d un dividende intérimaire d un montant brut de 0,50 EUR par action. Le 27 février 2014, le Conseil d Administration a décidé de proposer un dividende ordinaire de 1,68 EUR par action à l Assemblée annuelle des actionnaires du 16 avril En conséquence, Belgacom s attend à un dividende de 2,18 EUR bruts par action pour les résultats de l ensemble de l année Après approbation par l Assemblée annuelle des actionnaires, le dividende normal sera versé le 25 avril 2014, avec date d enregistrement le 24 avril 2014 et date de détachement du dividende le 22 avril La rémunération totale des actionnaires pour 2013 s élève donc à 702 millions EUR, y compris le dividende intérimaire. Par ailleurs, le Conseil d Administration de Belgacom se propose de continuer à accorder aux actionnaires de Belgacom un dividende attrayant et soutenable. Le Conseil d Administration souhaite donc payer un dividende annuel stable de 1,50 EUR par action (dividende intérimaire de 0,50 EUR et dividende ordinaire de 1,00 EUR) pour les 3 prochaines années, pour autant que les résultats financiers de Belgacom soient conformes à ses attentes. DIVIDENDE PAR ACTION (EN EUR) 1,93 1,38 0,55 1,52 1,52 1,89 1,60 0,29 2,18 1,68 0, (1) Dividende intermédiaire Dividende extraordinaire Dividende normal 2,18 1,68 0,50 2,08 1,68 0,40 CALENDRIER FINANCIER 2,18 1,68 0,50 16 avril 2014 Assemblée générale annuelle des actionnaires 22 avril 2014 Cotation ex-dividende des actions 25 avril 2014 Paiement du dividende ordinaire 9 mai 2014 Annonce des résultats du premier trimestre août 2014 Annonce des résultats semestriels octobre 2014 Annonce des résultats du troisième trimestre 2014 Remarque : ces dates sont susceptibles d être modifiées. (2) Belgacom définit le cash-flow libre comme le cash-flow généré par les activités d exploitation, moins les dépenses d investissement, y compris d autres activités d investissement, comme les acquisitions ou les ventes. 2,18 1,68 0,50 2,49 1,68 0,50 0,31 2,18 1,68 0,50 (1) Sous réserve d approbation par l Assemblée générale des actionnaires L ACTION BELGACOM 53 BELGACOM RAPPORT D ACTIVITÉS 2013

57 BELGACOM RAPPORT D ACTIVITÉS 2013 GOUVERNANCE D ENTREPRISE 54 DÉCLARATION RELATIVE À LA GOUVERNANCE D ENTREPRISE Le concept de gouvernance d entreprise vise à définir un ensemble de règles et de comportements destinés à optimiser la gestion et le contrôle des sociétés en vue d une plus grande transparence. Il s agit d un système de contrôles et d alignements entre les actionnaires, le Conseil d Administration et la direction. Belgacom s engage à se conformer aux obligations légales et réglementaires de même qu aux bonnes pratiques. Le modèle de gouvernance de Belgacom Les statuts de Belgacom sont fortement influencés par le statut juridique spécifique de la société. En tant que société anonyme de droit public, Belgacom est en premier lieu soumise à la loi du 21 mars 1991 portant réforme de certaines entreprises publiques économiques (dite «loi de 1991»). Pour toutes les matières non spécifiquement visées par la loi de 1991, Belgacom est régie par le droit belge des sociétés. Les principaux éléments du modèle de gouvernance de Belgacom sont les suivants : >> Un Conseil d Administration qui définit la politique et la stratégie générales de Belgacom et supervise la gestion opérationnelle ; >> Un Comité d audit et de supervision, un Comité de nomination et de rémunération et un Comité stratégique et de développement créés par le Conseil d Administration en son sein ; >> Un Administrateur Délégué, qui assure la responsabilité première de la gestion opérationnelle (en ce compris et de manière non limitative la gestion journalière) ; >> Un Comité de direction assistant l Administrateur Délégué dans l exercice de ses fonctions. Désignation du code applicable en matière de gouvernance d entreprise Belgacom décrète que le code applicable en la matière est le Code belge de gouvernance d entreprise Conseil d Administration Comme prévu par la loi de 1991, le Conseil d Administration se compose >> d administrateurs désignés par l État belge au prorata de sa participation ; >> d administrateurs désignés par un vote séparé parmi les autres actionnaires, pour les sièges restants. Au moins trois de ces administrateurs sont indépendants conformément aux critères de l article 526ter du Code belge des sociétés et aux critères du Code belge de gouvernance d entreprise. Le Conseil d Administration est composé de maximum seize membres, en ce compris l Administrateur Délégué. Le Conseil d Administration compte actuellement 14 membres. Modification de la composition du Conseil d Administration Les mandats de Madame Mimi Lamote, Madame Michèle Sioen et Monsieur Michel Moll prenaient fin le 23 décembre Conformément aux statuts de l entreprise, il appartient à l État belge de renouveler ces mandats ou de remplacer les membres concernés. Entre-temps et conformément au principe de continuité, les mandats ont été prolongés tacitement. Le 20 septembre 2013, le mandat de Monsieur Michel Moll en tant que Président a.i. a pris fin et en date du 27 septembre 2013, les mandats en tant qu administrateurs de Madame Michèle Sioen, Madame Mimi Lamote et Monsieur Michel Moll ont pris fin. En date du 20 septembre 2013, Monsieur Stefaan De Clerck a été nommé en tant qu administrateur et Président du Conseil d Administration. En date du 27 septembre 2013, Madame Isabelle Santens et Monsieur Laurent Levaux ont été nommés en tant qu administrateurs. En date du 15 novembre 2013, l Etat belge a mis fin au mandat de Monsieur Didier Bellens en tant qu Administrateur Délégué.

58 En date du 13 janvier 2014, Madame Dominique Leroy a été nommée en tant qu Administrateur Délégué pour un terme renouvelable de six ans. Fonctionnement du Conseil d Administration Le Conseil d Administration se réunit chaque fois que l intérêt de la société l exige ou chaque fois que deux administrateurs au moins le demandent. En principe, le Conseil d Administration se réunit cinq fois par an, à des dates régulières. Chaque année, le Conseil d Administration tient également une réunion supplémentaire afin d examiner le plan stratégique à long terme. Les décisions du Conseil d Administration sont en principe prises à la majorité simple des administrateurs présents ou représentés. Pour quelques matières spécifiques, une majorité qualifiée est requise. Le Conseil d Administration a adopté une charte qui, avec celles des comités du Conseil, expose les principes de fonctionnement du Conseil d Administration et de ses comités. Cette charte du Conseil prévoit notamment que les décisions importantes doivent bénéficier d un large soutien au sein du Conseil d Administration. Cette notion de «large soutien» doit être comprise comme un concept qualitatif indiquant une prise de décision efficace résultant d un dialogue constructif entre les administrateurs. Ces décisions importantes devront être préparées par des comités du Conseil, permanents ou spécifiquement créés, disposant d une représentation importante d administrateurs indépendants non exécutifs au sens de l article 526ter du Code des sociétés. La Charte de gouvernance d entreprise et la Charte du Conseil d Administration ont été modifiées en février 2014 afin de donner une interprétation plus large au principe du «conflit d intérêts». MEMBRES DU CONSEIL D ADMINISTRATION NOMMÉS PAR L ÉTAT BELGE Nom Âge Fonction Durée Stefaan De Clerck (1) 62 Président Didier Bellens (2) 58 Administrateur Délégué Dominique Leroy (6) 49 Administrateur Délégué Theo Dilissen 59 Administrateur Martine Durez 62 Administrateur Laurent Levaux (4) 58 Administrateur Isabelle Santens (4) 54 Administrateur Paul Van de Perre 60 Administrateur Mimi Lamote (5) 48 Administrateur Michèle Sioen (5) 47 Administrateur Michel Moll (3/5) 65 Administrateur (1) Mandat à partir du 20 septembre (2) Mandat jusqu au 15 novembre (3) Mandat en tant que Président a.i. jusqu au 20 septembre (4) Mandat à partir du 27 septembre (5) Mandat jusqu au 27 septembre (6) Nommée le 13 janvier MEMBRES DU CONSEIL D ADMINISTRATION NOMMÉS PAR L ASSEMBLÉE GÉNÉRALE DES ACTIONNAIRES Nom Âge Fonction Durée Jozef Cornu 69 Administrateur indépendant Pierre 55 Administrateur indépendant Demuelenaere Guido J.M. 63 Administrateur indépendant Demuynck Pierre-Alain 70 Administrateur indépendant De Smedt Carine 53 Administrateur indépendant Doutrelepont Oren G. Shaffer 71 Administrateur indépendant Lutgart Van den Berghe 62 Administrateur indépendant Comités du Conseil d Administration Conformément aux statuts, Belgacom compte un Comité d audit et de supervision, un Comité de nomination et de rémunération et un Comité stratégique et de développement. Comité d audit et de supervision Le Comité d audit et de supervision (Audit and Compliance Committee, ACC) se compose de cinq administrateurs non exécutifs, dont la majorité doit être des administrateurs indépendants. Conformément à sa charte, il est présidé par un administrateur indépendant. Le rôle du Comité d audit et de supervision est d assister et de conseiller le Conseil d Administration dans le cadre de son contrôle : >> du processus de reporting financier; >> de l efficacité des systèmes de contrôle interne et de gestion des risques de la société; >> de la fonction d audit interne de la société et de son efficacité; >> de la qualité, de l intégrité et du contrôle juridique des comptes annuels statutaires et consolidés ainsi que des états financiers de la société, y compris le suivi de questions et recommandations formulées par les commissaires-réviseurs; >> de la relation avec les commissaires-réviseurs de la société ainsi que de l évaluation et du contrôle de l indépendance de ces derniers; >> du respect, par la société, des exigences légales et réglementaires; >> du respect, au sein de la société, du Code de conduite de la société ainsi que du «Dealing Code». Le Comité d audit et de supervision se réunit au moins une fois par trimestre. Il est composé de MM. Pierre-Alain De Smedt (Président), Michel Moll (jusqu au 27 septembre 2013), Guido J.M. Demuynck, Oren G. Shaffer et Paul Van de Perre. Comité de nomination et de rémunération Le Comité de nomination et de rémunération (Nomination and Remuneration Committee, NRC) se compose de cinq administrateurs, dont la majorité doit être des administrateurs indépendants. Conformément à sa charte, il est présidé par le Président du Conseil d Administration, qui en est membre d office. Le rôle du Comité de nomination et de rémunération est d assister et de conseiller le Conseil d Administration concernant : >> la nomination de candidats aux postes de membres du Conseil d Administration et des comités du Conseil; >> la désignation de l Administrateur Délégué et la désignation, sur proposition de l Administrateur Délégué, des membres du Comité de direction; >> la désignation du Secrétaire général; >> la rémunération des membres du Conseil d Administration et des comités du Conseil; >> la rémunération de l Administrateur Délégué et des membres du Comité de direction; >> l analyse annuelle de la philosophie et de la stratégie de rémunération de l ensemble du personnel et, plus particulièrement, les packages salariaux de la haute direction; >> la supervision des décisions de l Administrateur Délégué en matière de désignation, de démission et d indemnisation de la direction; >> la préparation du rapport de rémunération et la présentation de ce rapport à l assemblée générale annuelle des actionnaires; >> les questions de gouvernance d entreprise. GOUVERNANCE D ENTREPRISE 55 BELGACOM RAPPORT D ACTIVITÉS 2013

59 MEMBRES DU CONSEIL D ADMINISTRATION DOMINIQUE LEROY Administrateur Délégué de Belgacom depuis le 13 janvier Plus d informations la concernant en page 60, Membres du Comité de Direction. BELGACOM RAPPORT D ACTIVITÉS 2013 GOUVERNANCE D ENTREPRISE STEFAAN DE CLERCK M. Stefaan De Clerck préside le Conseil d Administration de Belgacom depuis le 20 septembre Il a siégé au Parlement d octobre 1990 à octobre De juin 1995 à avril 1998 et de décembre 2008 à décembre 2011, il a été ministre belge de la Justice. Il a été bourgmestre de la ville de Courtrai (Belgique) de janvier 2001 jusque fin décembre M. De Clerck est licencié en droit de la KUL (Katholieke Universiteit Leuven). 3. JOZEF CORNU M. Cornu a entamé sa carrière en 1970 au Centre de recherche Brown Boveri (aujourd hui ABB) en Suisse. De 1973 à 1982, il a occupé diverses fonctions au sein de Bell Telephone Manufacturing Company, la filiale belge du Groupe ITT. De 1982 à 1984, il a été administrateur délégué de Mietec, une start-up fabriquant des semi-conducteurs. De 1984 à 1987, il a occupé le poste de directeur général de Bell Telephone Manufacturing Company. De 1988 à 1995, il a été membre du conseil d administration d Alcatel S.A., avant d assumer le poste de directeur général d Alcatel Telecom entre 1995 et De 2000 à 2008, il a été membre du conseil d administration d Alcatel (et plus tard d Alcatel-Lucent) et conseiller du président jusqu en De 2006 à 2007, il a été président de l ISTAG (Information Society Technologies Advisory Group) au sein de l Union européenne. De 2007 à 2008, il a été président de Medea+, le programme européen Eureka consacré à la recherche dans le domaine de la microélectronique. M. Cornu a été administrateur délégué d Agfa-Gevaert de décembre 2007 à fin avril 2010 et continue à siéger au sein de son conseil d administration. Il est également administrateur non exécutif à la KBC. Depuis le 13 novembre 2013, M. Cornu est administrateur délégué de la SNCB (Société nationale des chemins de fer belges). M. Cornu est titulaire d un diplôme d ingénieur civil électricien et en mécanique de la KUL (Katholieke Universiteit Leuven) et d un doctorat en électronique de la Carleton University d Ottawa, au Canada. 4. THEO DILISSEN Depuis janvier 2014, M. Dilissen préside le Conseil d Administration de Swissport Belgium (Swissport est une société internationale d assistance aéroportuaire au sol). Depuis janvier 2011, M. Dilissen est membre du Conseil d Administration d Eurostar. M. Dilissen a été Président du Conseil d Administration de Belgacom d octobre 2004 à mars M. Dilissen a été l administrateur délégué d Arcadis Belgium de juin 2010 à mars De septembre 2005 à la fin mars 2009, il a successivement occupé les postes d administrateur délégué et de président d Aviapartner. Auparavant, M. Dilissen a été administrateur délégué, managing director et vice-président de Real Software et de 1989 à 2000, COO et membre du conseil d administration d ISS (une société danoise cotée en Bourse). Sociologue de formation, il détient également un Master en administration des affaires. 5. PIERRE DEMUELENAERE M. Pierre Demuelenaere est cofondateur et administrateur délégué d I.R.I.S. (Image Recognition Integrated Systems), une entreprise créée en 1987 en vue de commercialiser les résultats de sa thèse de doctorat. Il dispose de plus de 30 ans d expérience dans le domaine de l imagerie et de l intelligence artificielle. Il a acquis une solide expérience dans les domaines de la gestion des entreprises technologiques, de la recherche et du développement ainsi que dans l établissement de partenariats internationaux avec des entreprises aux États-Unis et en Asie (HP, Kodak, Adobe, Fujitsu, Samsung, Canon, etc.) Au fil des années, il est resté étroitement impliqué, au travers de sa contribution au développement de nouvelles technologies et de nouveaux produits ainsi qu à l enregistrement de plusieurs brevets, dans la définition de la vision d I.R.I.S. au niveau de la recherche et du développement. M. Demuelenaere s est vu décerner en 2001 le prix de «Manager de l Année» tandis qu I.R.I.S. a reçu le prix «Entreprise de l Année» en Data News l a également désigné comme personnalité ICT de l année en Il occupe également un poste d administrateur au sein de Pairi Daiza, BSB et Guberna. En 2013, Pierre Demuelenaere a mené à bonne fin les négociations d acquisition du groupe I.R.I.S. par Canon. La société fait à présent partie du groupe Canon. M. Demuelenaere est titulaire d un diplôme d ingénieur civil en microélectronique de l Université Catholique de Louvain (UCL), où il a obtenu son doctorat en sciences appliquées en

60 6. GUIDO J.M. DEMUYNCK Jusqu en décembre 2010, M. Demuynck était administrateur délégué de Liquavista. Il a auparavant occupé différentes fonctions chez Royal Philips Electronics NV entre 1976 et Il a notamment exercé les fonctions de Vice-President Marketing Audio aux USA, d administrateur délégué de Philips en Corée du Sud, de General Manager Line of Business Portable Audio à Hong Kong et d administrateur délégué de Group Audio à Hong Kong. En 2000, il est devenu administrateur délégué de la division de produits Consumer Electronics à Amsterdam et membre du comité de direction du groupe Philips. En 2003, M. Demuynck a rejoint les rangs de Royal KPN, où il est devenu membre du comité de direction et administrateur délégué de la division mobile (KPN Mobiel Nederland, Base Belgium, E-Plus Germany). Jusqu en juillet 2008, il a occupé le poste d administrateur délégué de Kroymans Corporation BV aux Pays-Bas. M. Demuynck est également membre, depuis juin 2005, du conseil de surveillance de Tom Tom. Depuis janvier 2011, il est également membre des conseils d administration d Apollo Vredestein BV et de Xsens BV. Depuis mai 2011, il siège également au Conseil de Teleplan International NV. Depuis janvier 2012, il est administrateur de Divitel BV et Aito BV. Il est licencié en sciences économiques appliquées de l Université d Anvers (UFSIA) et licencié en marketing de l Université de Gand (R.U.G.). 7. PIERRE-ALAIN DE SMEDT M. De Smedt est, depuis mars 2011, président de la Fédération des Entreprises de Belgique (FEB). Auparavant et depuis juin 2006, il était président de la Febiac (Fédération belge de l Automobile et du Cycle). Il a été vice-président exécutif de Renault de 1999 à fin Il a présidé aux destinées d Autolatina, la coentreprise de VAG et de Ford en Amérique latine, ainsi que de Volkswagen au Brésil et en Argentine, avant de prendre la présidence de Seat. M. De Smedt préside également le conseil d administration du Groupe Deceuninck Plastics et siège à celui d Alcopa (Groupe Moorkens) et RECTICEL S.A. Il est diplômé en ingénierie et en sciences économiques de l Université libre de Bruxelles (ULB). 8. CARINE DOUTRELEPONT Mme Doutrelepont est avocate au Barreau de Bruxelles et membre du Barreau de Paris. Elle est partenaire fondatrice du bureau d avocats belge Doutrelepont & Partners, spécialisé en technologies de l information et de la communication, en propriété intellectuelle, en droit des médias, en droit de la concurrence et en droit européen. Elle est titulaire d un doctorat en droit européen de l Université libre de Bruxelles (ULB). Elle enseigne le droit des médias, le droit de la propriété intellectuelle et le droit européen à la Faculté de droit de l ULB, à l Institut d Études européennes ainsi que dans différentes universités étrangères. Pendant de nombreuses années, elle a travaillé en qualité d experte pour la Commission européenne, au Sénat belge ainsi qu auprès du Conseil belge de la concurrence. Depuis 2008, elle est membre de l Académie royale de Belgique (Classe Technologie et Société). Elle a signé plusieurs ouvrages et publications. Mme Doutrelepont est également membre du conseil d administration de la Fondation Roi Baudouin et de la Banque Belfius. 9. MARTINE DUREZ Mme Durez a été Chief Financial et Accounting Officer chez bpost jusqu en janvier 2006, avant d en devenir la présidente du conseil d administration. Mme Durez a également été, jusqu en 2000, professeur de gestion et d analyse financière à l Université de Mons-Hainaut. Elle a également été membre du Conseil supérieur des réviseurs d entreprises et de la Commission des normes comptables, puis conseillère spéciale du ministre des Communications et des Entreprises publiques. Elle a été Régente à la Banque Nationale de Belgique. Mme Durez possède un diplôme d ingénieur commercial et un doctorat en sciences économiques appliquées de l Université libre de Bruxelles (ULB). 10. LAURENT LEVAUX Diplomé en économie avec grande distinction à l UCL (Bruxelles, Belgique), M. Laurent Levaux a entamé sa carrière à l âge de 22 ans en assumant la direction d une petite société liégeoise en difficulté et employant à l époque une centaine de collaborateurs. En quatre ans, l entreprise s est rétablie, s est développée et a fusionné avec un grand groupe international. Il a ensuite décroché un MBA à la University of Chicago (1985) avant de travailler pour McKinsey & Co pendant une dizaine d années, occupant les quatre dernières années de son passage la fonction de partenaire et y assumant des missions stratégiques et de restructuration partout en Europe. En 1995, il a rejoint le Comité de direction du groupe sidérurgique belge Cockerill-Sambre en tant que responsable de ses filiales non sidérurgiques, en particulier de CMI, une société déficitaire, dont il est devenu administrateur délégué. Lorsqu il a quitté CMI en février 2003, la société était devenue un groupe d ingénierie et de maintenance exempt de dettes, en croissance et rentable. En mars 2003, Laurent Levaux est devenu administrateur délégué du groupe logistique multinational ABX LOGISTICS, ayant son siège en Belgique. La société accumulait de lourdes pertes depuis sa création en Dès 2003, les résultats se sont constamment améliorés au point d atteindre le niveau des acteurs les plus performants du secteur. En octobre 2008, ABX LOGISTICS a fusionné avec le groupe danois DSV, coté à la Bourse de Copenhague. Depuis octobre 2008, Laurent Levaux est président-directeur général d Aviapartner. Aviapartner, dont le siège se trouve à Bruxelles, est l un des leaders dans le domaine des services d assistance au sol pour passagers sur le continent européen. 11. ISABELLE SANTENS Mme Isabelle Santens est administrateur délégué d Andres NV, une société de mode belge concevant, produisant et distribuant les marques de vêtements pour femmes XANDRES, XANDRESXLINE et HAMPTON BAYS. Après avoir étudié la géographie et l économie à la KUL (Katholieke Universiteit Leuven), elle a rejoint Andres en 1985, pour évoluer vers la fonction de Director of Design et enfin, en 2000, d administrateur délégué. Elle a transformé une structure de simple production en une société axée sur la vente et le marketing, spécialisée dans la conception de marques performantes et axée sur l ouverture de magasins pilotes. Elle siège également au conseil d aministration de nombreuses institutions culturelles. 12. OREN G. SHAFFER M. Shaffer a été auparavant vice-président et Chief Financial Officer de Qwest Communications International de 2002 à 2007 et président et Chief Operating Officer de Sorrento Networks. Il a également été membre du Conseil d Administration de Belgacom de 1996 à Il siège actuellement au sein des conseils d administration de DEMAG Cranes A.G. (Allemagne), Intermec Inc., Terex Corporation et XPO Logistics (Etats-Unis). Il est titulaire d un Bachelor of Science en administration des affaires de l Université de Berkeley, en Californie, et d un Master of Science en gestion du Massachusetts Institute of Technology. 13. LUTGART VAN DEN BERGHE Mme Van den Berghe est administratrice exécutive de Guberna, l institut belge des administrateurs, et professeur extraordinaire à l Université de Gand. Elle est également partenaire de la Vlerick Business School, où elle a assumé pendant de nombreuses années la fonction de présidente du centre de compétence «Entrepreneurship, Governance and Strategy». Elle est membre de la Commission Corporate Governance et administratrice non exécutive de plusieurs sociétés, comme Electrabel (Belgique) et Belfius (Belgique). Elle est membre du conseil d administration de la Confédération européenne des Associations d Administrateurs (EcoDa) et présidente de son Comité «Policy». Mme Van den Berghe a obtenu un doctorat en économie à l Université de Gand. 14. PAUL VAN DE PERRE M. Van de Perre a cofondé la GIMV (une société de capital-risque cotée à l Euronext) et a été administrateur de Sidmar (Arcelor-Mittal), Thomassen Drijver Verblifa Belgium, Sunparks (division de Sunair) et d autres sociétés. Il est actuellement administrateur de Greenbridge Incubator (Université de Gand) et du Scientific Investment Board (Université de Bruxelles), président de Thenergo (cotée à l Euronext) et siège au comité d investissement de PMV. M. Van de Perre est administrateur délégué de Five Financial Solutions (corporate finance) et administrateur délégué de Caesar Real Estate Fund (société de capital-risque). Également expert-comptable (IAB), il est titulaire d un MBA en économie. GOUVERNANCE D ENTREPRISE 57 BELGACOM RAPPORT D ACTIVITÉS 2013

61 Le Comité de nomination et de rémunération se réunit au moins quatre fois par an. BELGACOM RAPPORT D ACTIVITÉS 2013 GOUVERNANCE D ENTREPRISE 58 La première réunion a pour objectif d examiner les résultats, les budgets consacrés au paiement des bonus et mérites et les plans d intéressement à long et à court termes. Cette réunion est également l occasion de discuter de la philosophie et de la stratégie en matière de rémunération. Au cours d une deuxième réunion, le Comité de nomination et de rémunération fixera, sur la base d indicateurs de performance clés, les objectifs d évaluation des performances de l Administrateur Délégué et des membres du Comité de direction. Le Comité organisera en outre deux autres réunions, consacrées respectivement aux ressources humaines et à la gouvernance d entreprise. En 2013, le Comité de nomination et de rémunération se composait de MM. Stefaan De Clerck (membre et Président à partir du 20 septembre 2013), Michel Moll (membre et Président a.i. jusqu au 20 septembre 2013), Jozef Cornu, Pierre-Alain De Smedt et de Mmes Martine Durez et Lutgart Van den Berghe. Comité stratégique et de développement Le Comité stratégique et de développement (Strategic and Business Development Committee, SBDC) se compose de six administrateurs. Conformément à sa charte, il est présidé par le Président du Conseil d Administration, et l Administrateur Délégué et le Président du Conseil d Administration en sont membres d office. Un membre supplémentaire est choisi parmi les administrateurs désignés par l État belge. Trois de ses membres doivent être désignés parmi les administrateurs désignés par l assemblée générale des actionnaires. Le rôle du Comité stratégique et de développement est d analyser les projets d acquisitions, de fusions et de désinvestissements d un montant supérieur à 100 millions EUR et d analyser des programmes importants de restructuration de l entreprise. Le Conseil d Administration peut décider, au besoin, d organiser un Comité spécial ad hoc chargé de se pencher sur un dossier spécifique et composé de membres dotés de l expérience requise. En 2013, le Comité stratégique et de développement était composé de MM. Stefaan De Clerck (Président à partir du 20 septembre 2013), Michel Moll (Président a.i. jusqu au 20 septembre 2013), Didier Bellens (jusqu au 15 novembre 2013), madame Dominique Leroy (à partir du 13 janvier 2014) et de MM. Jozef Cornu, Theo Dilissen, Guido J.M. Demuynck et Mme Carine Doutrelepont. Dérogation au Code belge de gouvernance d entreprise de 2009 Belgacom se conforme aux principes et dispositions du Code belge de gouvernance d entreprise de 2009, à l exception des dispositions 4.6 et 4.7. Bien que la disposition 4.6 stipule que les mandats des administrateurs ne doivent pas excéder quatre ans, les mandats des administrateurs de Belgacom ont une durée de six ans, comme le prescrit l article 18 de la loi de Alors que la disposition 4.7 déclare que le Conseil nomme son Président, l article 18 5 de la loi de 1991 prévoit que le Président est nommé par le Roi. Transactions entre la société et ses administrateurs et directeurs exécutifs Une règle générale relative au conflit d intérêts est en vigueur au sein de la société. Elle interdit la possession d intérêts financiers susceptibles d affecter le jugement personnel ou les tâches professionnelles au détriment du Groupe Belgacom. Conformément à l article 523 du Code des sociétés, l Administrateur Délégué, Monsieur D. Bellens, a déclaré, pendant la séance du Conseil d Administration du 28 février 2013, qu il se trouvait en position de conflit d intérêts concernant «les plans d intéressement pour le personnel», un point qui était à l agenda de cette réunion du Conseil d Administration. Conformément à l article 523 du Code des sociétés, Madame L. Van den Berghe et Madame C. Doutrelepont ont déclaré, pendant la séance du Conseil d Administration du 2 mai 2013, qu elles se trouvaient en position de conflit d intérêts concernant «le projet Idar», un point qui était à l agenda de cette réunion du Conseil d Administration. Conformément à l article 523 du Code des sociétés, l Administrateur Délégué, Monsieur D. Bellens a déclaré, pendant la séance du Conseil d Administration du 25 juillet 2013, qu il se trouvait en position de conflit d intérêts concernant «les plans d intéressement pour le personnel», un point qui était à l agenda de cette réunion du Conseil d Administration. Conformément à l article 523 du Code des sociétés, Madame M. Durez, Madame M. Lamote, Madame M. Sioen, Monsieur M. Moll et Monsieur P. Van de Perre ont déclaré, pendant la séance du Conseil d Administration du 25 septembre 2013, qu ils se trouvaient en position de conflit d intérêts concernant le point relatif à la «Nomination de nouveaux administrateurs», un point qui était à l agenda de cette réunion du Conseil d Administration. En date du 24 février 2011, le Conseil d Administration a adopté une «policy» relative aux transactions de parties liées. Cette policy régit toutes les transactions ou autres relations contractuelles entre la société et les membres de son Conseil d Administration. Belgacom a des relations contractuelles et fournit également des services de téléphonie, internet et/ou ICT à bon nombre des entreprises dans lesquelles des membres du Conseil d Administration exercent un mandat exécutif ou non exécutif. Ces transactions ont lieu dans le déroulement normal des opérations et dans des conditions normales de libre concurrence. Belgacom est par ailleurs partenaire institutionnel de Guberna, l institut belge des Administrateurs (associé à Mme Lutgart Van den Berghe, Administratrice Exécutive de Guberna), pour lequel elle a versé une contribution de EUR en Rapport d activités du Conseil et des comités En 2013, il y a eu 8 réunions du Conseil d Administration, 8 réunions du Comité d audit et de supervision, 6 réunions du Comité de nomination et de rémunération et 3 réunions du Comité stratégique et de développement. Une liste des présences individuelles des membres est reprise dans le Rapport de Rémunération.

62 Application des mesures prises par la société afin de se conformer à la législation en matière de délit d initié et de manipulations de marché (abus de marché) Afin de se conformer à la législation en matière de délit d initié et de manipulations de marché, Belgacom a adopté un code de transactions (Dealing Code) avant l introduction en Bourse. Ce code vise à faire prendre conscience aux collaborateurs, aux dirigeants et aux administrateurs des comportements inappropriés et des éventuelles sanctions. Ce Dealing Code a été largement communiqué et est à la disposition de tous les collaborateurs. Une liste des personnes clés est tenue à jour et tous les administrateurs et collaborateurs clés ont été invités à signer une déclaration dans laquelle ils reconnaissent avoir lu et compris les dispositions du Dealing Code et s engagent à les respecter. Des périodes fermées («closed periods», comprenant des périodes proscrites) sont définies et toute transaction doit être communiquée au préalable au responsable de Compliance Services et être approuvée par ce dernier (voir chapitre «Conformité» à la page 61). Évaluation du Conseil d Administration Le Conseil d Administration a procédé en décembre 2012 à une auto-évaluation afin d évaluer sa taille, sa composition, ses résultats et la manière dont il interagissait avec la direction. Il a fait appel, pour cet exercice, à l aide de Spencer Stuart en qualité d expert externe. Les membres ont été invités à répondre à un questionnaire détaillé, suivi d un entretien entre l expert externe et chaque membre. Les membres étaient invités, en se fondant sur les conclusions de la précédente évaluation et sur le plan d action qui en avait été tiré, à dire ce qu ils pensaient de la gouvernance d entreprise à Belgacom, du fonctionnement du Conseil d Administration, des relations au sein de ce dernier et du fonctionnement des comités. Ces consultations ont amené le Conseil d Administration à décider, lors de sa réunion du 28 février 2013, de mettre en oeuvre les actions à court terme suivantes : >> établir annuellement un agenda pour les comités ; >> organiser une session didactique relative au rôle des comités et à la gestion des risques ; >> donner annuellement une présentation au Conseil d Administration relative à la planification de succession ; >> développer un système de reporting permettant au Conseil d Administration de suivre les facteurs opérationnels clés de la société ; >> prévoir une réunion supplémentaire du comité stratégique. Management Administrateur Délégué L Administrateur Délégué est nommé par l État belge, par arrêté royal délibéré en Conseil des ministres. Son mandat est renouvelable tous les six ans et ne peut prendre fin que par arrêté royal délibéré en Conseil des ministres. Conformément à la loi de 1991 et aux statuts de la société, l Administrateur Délégué est membre du Conseil d Administration. L Administrateur Délégué et le Président du Conseil d Administration doivent appartenir à des rôles linguistiques différents. L Administrateur Délégué est chargé de la gestion journalière de la société et fait rapport au Conseil d Administration. En outre, conformément à la loi de 1991 et aux statuts de la société, le Conseil d Administration peut, en statuant à la majorité des deux tiers de ses membres présents ou représentés, déléguer tout ou partie de ses pouvoirs à l Administrateur Délégué, à l exception des compétences suivantes : >> l approbation du contrat de gestion avec l État belge et les modifications y apportées ; >> l élaboration du plan d entreprise et la définition de la politique générale de la société ; >> le contrôle de l Administrateur Délégué ; >> les autres pouvoirs expressément réservés par la loi au Conseil d Administration, qui incluent notamment l établissement des comptes annuels devant être soumis à l assemblée générale des actionnaires et la préparation des propositions de fusion. Le Conseil d Administration a délégué de larges compétences à l Administrateur Délégué. L Administrateur Délégué actuel est Madame Dominique Leroy. Son contrat, pour un terme renouvelable de six ans, a pris cours le 13 janvier Comité de direction Les membres du Comité de direction sont nommés et révoqués par le Conseil d Administration sur proposition de l Administrateur Délégué, après consultation du Comité de nomination et de rémunération. Les compétences du Comité de direction sont déterminées par l Administrateur Délégué. Le rôle du Comité de direction est d assister l Administrateur Délégué dans l exercice de ses fonctions. Le Comité de direction adopte en principe ses décisions par consensus. Toutefois, en cas de désaccord, la voix de l Administrateur Délégué prévaut. Le Comité de direction se réunit généralement toutes les semaines. Le Comité de direction se compose des membres suivants, en plus de l Administrateur Délégué (voir tableau ci-dessous). Nom Âge Fonction Michel GEORGIS 61 Executive Vice President Group Human Resources Dirk LYBAERT 53 Executive Vice President Corporate Affairs Geert STANDAERT 44 Executive Vice President Service Delivery Engine & Wholesale Ray STEWART 65 Executive Vice President Finance Bart VAN DEN MEERSCHE 56 Executive Vice President Enterprise Business Unit Phillip VANDERVOORT 52 Executive Vice President Consumer Business Unit GOUVERNANCE D ENTREPRISE 59 BELGACOM RAPPORT D ACTIVITÉS 2013 M. Bruno Chauvat, qui était l Executive Vice President Strategy & Content, a quitté la société le 24 janvier M. Dirk Lybaert a été nommé en date du 24 janvier 2014 Executive Vice President Corporate Affairs. M. Phillip Vandervoort a été nommé à partir du 1 er avril 2014 Executive Vice President Consumer Business Unit.

63 BELGACOM RAPPORT D ACTIVITÉS 2013 GOUVERNANCE D ENTREPRISE 60 MEMBRES DU COMITÉ DE DIRECTION 1. DOMINIQUE LEROY Dominique Leroy est depuis le 13 janvier 2014 Administrateur Délégué de Belgacom. Elle a rejoint Belgacom en octobre 2011 en qualité de Vice President Sales pour la Consumer Business Unit et a été désignée en qualité d Executive Vice President de la Consumer Business Unit de Belgacom en juin Avant de rejoindre Belgacom, Mme Leroy a travaillé 24 ans pour Unilever. Elle a siégé au Comité de Direction d Unilever Benelux, où elle a également occupé le poste de Managing Director. Auparavant, elle a exercé diverses fonctions dans les domaines du marketing, de la finance et du développement de la clientèle. Mme Leroy est membre des conseils d administration de Tango, de Scarlet et de BICS et membre indépendant du conseil d administration de Lotus Bakeries. Mme Leroy est titulaire d un «Master in Advanced Management» (Business Engineering) de la Solvay Business School. 2. MICHEL GEORGIS De juin 2007 à décembre 2011, Michel Georgis était l Executive Vice President de la Consumer Business Unit de Belgacom. Depuis le 1er janvier 2012, il exerce les fonctions d Executive Vice President Group Human Resources. Il est également président du conseil d administration de Tango Luxembourg, Scarlet nv Nederland et Wireless Technologies (The Phone House) et membre des conseils d administration de BICS et du Fonds de Pension. De mai 2005 à l intégration en janvier 2010, Michel Georgis était administrateur délégué de Proximus (Belgacom Mobile). Avant cela, Michel Georgis était Chief Operations Officer chez Proximus depuis janvier Il a rejoint Proximus en janvier 2000 en tant qu Executive Vice President Sales, Marketing & Customer Operations. M. Georgis a débuté sa carrière en 1977 chez Coca-Cola Belgique. En 1991, il a rejoint Interbrew, où il a occupé plusieurs fonctions avant de devenir Sales & Marketing Director pour l Europe centrale et de l Est. M. Georgis est titulaire d une licence en sciences économiques appliquées de l Université de Louvain (KUL). 3. RAY STEWART Ray Stewart exerce les fonctions d Executive Vice President Finance & CFO. Auparavant, de 1994 à 1997, il a occupé le poste de Chief Financial Officer de Matav, l opérateur de télécommunication historique en Hongrie. De 1991 à 1994, il a été le Chief Financial Officer d Ameritech International, c est-à-dire le département de développement des activités internationales de la société Ameritech établie à Chicago. M. Stewart est titulaire d un diplôme en comptabilité et d un MBA en finance. Il est également expert-comptable. Ray Stewart est aussi membre du conseil d administration de Nyrstar depuis septembre BART VAN DEN MEERSCHE Bart Van Den Meersche est l Executive Vice President de l Enterprise Business Unit de Belgacom. M. Van Den Meersche a rejoint les rangs de Belgacom après avoir travaillé pendant 28 ans dans le secteur ICT dans le cadre d une carrière professionnelle chez IBM. Il y a occupé pendant 16 ans différentes fonctions de direction, dont 8 ans en qualité de Country General Manager d IBM Belgique/Luxembourg. Durant sa dernière année à IBM, il exerçait les fonctions de Vice President Industries & Business Development IBM South-West Europe et était membre de l IBM South- West Europe Executive Management Team. Bart Van Den Meersche est titulaire d un diplôme de mathématiques de l université de Louvain (KUL). M. Van Den Meersche a été pendant 6 ans président d Agoria ICT et également membre du conseil d administration d Agoria, de la VOKA et de la FEB. 5. DIRK LYBAERT Dirk Lybaert est Executive Vice President Corporate Affairs, regroupant sous son égide les domaines de responsabilité suivants : Group Communications, Legal, Public Affairs, Regulatory, Security Governance et Investigations. Il est également le secrétaire du conseil d administration de Tango Luxembourg et du Fonds de pension de Belgacom et siège au sein des conseils d administration de Belgacom International Carrier Services (BICS) et de Belgacom Opal. M. Lybaert exerçait depuis 2005 les fonctions de Secrétaire général à Belgacom. De 1995 à 2007, il a été assistant à la faculté de droit de l Université de Bruxelles où il dispensait le cours consacré aux contrats nommés. De 2000 à 2005, il a exercé différentes fonctions au sein du département juridique de Belgacom. Avant de travailler à Belgacom, M. Lybaert était officier à la Police Fédérale, où il a terminé sa carrière au grade de lieutenant-colonel et à la fonction de directeur du programme antiterrorisme. M. Lybaert est titulaire de diplômes de criminologie, de droit et de droit des sociétés ainsi que de diplômes en «Advanced Management» et en sciences sociales et militaires. 6. GEERT STANDAERT Geert Standaert a rejoint le Comité de direction de Belgacom en qualité d Executive Vice President Service Delivery Engine & Wholesale en mars Dans cette fonction, il supervise l ensemble des opérations, de l infrastructure technique, du service engineering et des développements IT pour le Groupe ainsi que les activités wholesale. M. Standaert a rejoint le Groupe en Il a occupé différents postes de Director dans divers domaines, notamment IT, Infrastructure Operations et Data Operations avant de devenir Vice President Customer Operations en M. Standaert est titulaire d un diplôme d ingénieur civil de l Université de Gand. 7. PHILIP VANDERVOORT Phillip Vandervoort a rejoint le Groupe Belgacom le 01/04/2014 en qualité d Executive Vice President de la Consumer Business Unit. Auparavant, il avait exercé dans plusieurs sociétés importantes, comme Dupont de Nemours International, Union Minière, Interbrew/Inbev et finalement Microsoft Corporation en M. Vandervoort est ingénieur industriel et diplômé en business administration

64 Collège des Commissaires Le Collège des Commissaires de la société se compose des personnes suivantes : >> Deloitte Réviseurs d Entreprises SC sfd SCRL, représentée par M. Geert VERSTRAETEN, qui préside le Collège des Commissaires ; >> Romain LESAGE, membre de la Cour des comptes ; >> Pierre RION, membre de la Cour des comptes ; >> Luc Callaert SC sfd SPRLU, représentée par Luc CALLAERT. Deloitte Réviseurs d Entreprises SC sfd SCRL, représentée par M. G. Verstraeten et M. N. Houthaeve, est responsable du contrôle des comptes consolidés de Belgacom et de ses filiales. Les autres membres du Collège des Commissaires sont chargés, conjointement avec Deloitte, du contrôle des comptes non consolidés de la société mère. Le mandat de M. Lesage expirera le 30 juin 2014 et les mandats de M. Rion, de Deloitte et de Callaert viendront à échéance lors de l assemblée générale annuelle des actionnaires de Émoluments supplémentaires versés aux Commissaires Conformément aux dispositions de l article 134, 2, du Code des sociétés, Belgacom déclare les émoluments supplémentaires qu elle a versés pendant l exercice 2013 à deux Commissaires, membres du Collège des Commissaires : Deloitte Reviseurs d entreprises SC sfd SCRL et Luc Callaert SC sfd SPRLU. En 2013, le Groupe a dépensé un montant de EUR en honoraires hors mandat pour Deloitte Réviseurs d entreprises SC sfd SCRL, les réviseurs du Groupe. Ce montant se répartit comme suit : (en EUR) Commissaire Réseau de Commissaires Autres missions d audit obligatoires Conseils fiscaux Autres missions Total En 2013, le Groupe a également dépensé un montant de EUR en honoraires hors mandat versés à Luc Callaert SC sfd SPRLU. Ce montant se répartit comme suit: (en EUR) Commissaire Autres missions d audit obligatoires Conseils fiscaux Autres missions Total Commissaire du gouvernement En date du 17 avril 2012, M. Michel Vanden Abeele a été nommé Commissaire du gouvernement afin de superviser, conformément à la loi de 1991, la gestion de Belgacom d un point de vue administratif. Monsieur Amaury Caprasse a été nommé Commissaire du Gouvernement Suppléant. Conformité Rôle de la conformité à Belgacom Dans un contexte législatif et réglementaire de plus en plus complexe et un environnement professionnel changeant ainsi qu une conjoncture économique difficile, la conformité joue un rôle important dans le monde de l entreprise. Le «Compliance Office» du Groupe Belgacom a pour tâches de coordonner les activités menées au sein du Groupe Belgacom en matière de conformité, d expliquer les règles en vigueur, de fournir les instruments requis pour inciter à la conformité et d assurer une approche cohérente de la conformité au sein du Groupe. Le programme de conformité est une composante clef dans notre stratégie Responsabilité Sociétale (plus d infos p. 22). Tous les membres du personnel doivent accomplir leurs activités quotidiennes et leurs objectifs commerciaux selon les normes et principes éthiques les plus stricts, en se servant des valeurs de l entreprise (Respect, Can do et Passion) comme fil conducteur. Le Code «Une entreprise socialement responsable» décrit les principes susmentionnés et a pour objectif d inspirer chaque membre du personnel dans ses comportements et attitudes au quotidien. Le comportement éthique ne se limite pas au respect du texte du Code. Le Code est un résumé des principaux principes et n est donc pas exhaustif. Les principes et les règles repris dans le Code sont développés plus en détail dans les différentes policies internes et procédures. Le Code est disponible sur le site Organisation des activités de conformité Le Compliance Office est dirigé par le Vice President Group Legal, qui rend directement compte au Président du Comité d audit et de supervision (ACC). Conformément aux dispositions de l ACC, ce comité est chargé d assister et de conseiller le Conseil d Administration dans le cadre du contrôle du respect, par la société, des exigences légales et réglementaires et du respect, au sein de la société, du Code «Une entreprise socialement responsable», ainsi que des différentes policies. Le programme de conformité Le comportement éthique et le respect des valeurs font partie de l approche adoptée par le Groupe Belgacom en matière de conformité. Dans la ligne des actions des années précédentes, en 2013, les efforts suivants ont été entrepris afin d améliorer la visibilité du Code de Conduite et ses policies: >> Un accent tout particulier a été mis sur la sécurité de l information. Une grande campagne de sensibilisation vers nos employés a été lancée par l intranet et voie d affichage. Cette campagne a été soutenue également par des films éducationnels. >> Belgacom a ouvert les médias sociaux à tous ses employés en mai Pour soutenir cette ouverture et sensibiliser les utilisateurs à une utilisation responsable de ces nouveaux instruments, plusieurs moyens ont été mis en place : une policy, des formations, un film, des questions-réponses, >> Belgacom a publié une nouvelle policy sur la corruption qui s inscrit dans la droite ligne du Code de conduite, établissant une politique de tolérance zéro face à toute forme de corruption. Cette policy reprend en un seul document des principes qui sont développés dans plusieurs autres policies. Les domaines de conformité qui ont été les axes prioritaires en 2013 étaient les suivants : 1. La protection des données ; 2. L usage responsable des medias sociaux ; 3. Le Dealing Code ; 4. Respect de la réglementation ; 5. Droit de la concurrence ; 6. Chinese walls ; 7. Environnement ; 8. Respect de la vie privée. GOUVERNANCE D ENTREPRISE 61 BELGACOM RAPPORT D ACTIVITÉS 2013

65 BELGACOM RAPPORT D ACTIVITÉS 2013 GOUVERNANCE D ENTREPRISE 62 Belgacom attache une grande importance à la transparence de la rémunération du top management. Dès lors, conformément à la loi du 6 avril 2010 en matière de gouvernance d entreprise et au principe 7 du Code de gouvernance d entreprise de 2009, l entreprise fournit les informations suivantes à ses actionnaires et à toutes les autres parties prenantes : une description de la rémunération des administrateurs et une explication générale de la politique du Groupe en matière de rémunération. Elles comprennent par ailleurs une analyse de la rémunération des top managers et fournissent un aperçu des principales dispositions en matière de relations contractuelles. Nom RAPPORT DE REMUNERATION 2013 RAPPORT D ACTIVITÉS ET PRÉSENCE AUX RÉUNIONS DU CONSEIL ET DES COMITÉS Conseil (total 8) CAS (total 8) CNR (total 6) CSD (total 3) Rémuneration totale (en EUR) Stefaan DE CLERCK (1) 4/4 3/3 1/ Didier BELLENS (2) 6/6 3/3 0 Jozef CORNU 8/8 6/6 3/ Pierre 8/ DE MUELENAERE Guido DEMUYNCK 8/8 8/8 3/ Pierre-Alain DE SMEDT 7/8 7/8 6/ Theo DILISSEN 6/8 3/ Carine 8/8 2/ DOUTRELEPONT Martine DUREZ 8/8 6/ Laurent LEVAUX (4) 2/ Isabelle SANTENS (4) 3/ Oren G. SHAFFER 7/8 8/ Lutgart 8/8 6/ VAN DEN BERGHE Paul VAN DE PERRE 8/8 8/ Mimi LAMOTE (5) 4/ Michel MOLL (3/5) 4/4 3/3 3/3 2/ Michèle SIOEN (5) 4/ Rémunération totale : avantages télécoms inclus CAS : Comité d Audit et de Supervision ; CNR : Comité de Nomination et de Rémunération ; CSD : Comité Stratégique et de Développement ; (1) Mandat depuis le 20 septembre 2013 (2) Mandat jusqu au 15 novembre 2013 (3) Mandat de Président a.i. jusqu au 20 septembre 2013 (4) Mandat depuis le 27 septembre 2013 (5) Mandat jusqu au 27 septembre 2013 Didier Bellens a exercé les fonctions d Administrateur Délégué jusqu en novembre En janvier 2014, un nouvel Administrateur Délégué a été nommé en la personne de Dominique Leroy. Cette désignation a coïncidé avec la définition d un nouveau plafond dans la politique de rémunération du top management de Belgacom. La politique de rémunération du top management de Belgacom tiendra compte désormais de ce nouveau plafond lors de la désignation de tout nouveau membre au sein du Comité de direction. Conformément à la demande formulée lors de l assemblée annuelle des actionnaires de 2013, le Conseil d administration a également examiné la rémunération de ses membres et a comparé celle-ci avec différentes références. Ces références montrent que la rémunération chez Belgacom est en ligne avec le marché. Le Conseil a toutefois estimé que dans la période actuelle, où des efforts sont demandés à la direction et aux employés, il est important de signaler clairement que les membres du Conseil veulent eux aussi partager ces efforts. Pour cette raison, le Conseil a décidé d appliquer une réduction de 10% sur la rémunération de 2014, ce qui est conforme à la proposition du Comité de direction, à savoir de réduire volontairement, pour les performances de 2013 du top 170 de l entreprise, l enveloppe pour la partie individuelle de la rémunération variable à court terme (bonus) de 10%. Rémunération des administrateurs Politique en matière de rémunération des administrateurs Les rémunérations et les indemnités versées aux administrateurs ont été fixées par l assemblée générale des actionnaires de Les principes régissant ces indemnités n ont pas changé en 2013 et prévoient une indemnité fixe annuelle de EUR pour le Président du Conseil d Administration et de EUR pour les autres membres du Conseil d Administration, à l exception de l Administrateur Délégué. Tous les membres du Conseil d Administration, à l exception de l Administrateur Délégué, ont droit à un jeton de présence de EUR par réunion du Conseil d Administration à laquelle ils assistent. Ce jeton est doublé pour le Président. Des jetons de présence de EUR sont prévus pour chaque membre d un comité consultatif du Conseil d Administration, à l exception de l Administrateur Délégué. Le montant de ces jetons de présence est doublé pour le Président de ces différents comités consultatifs. Les membres perçoivent également une indemnité de EUR par an pour frais de communication. L indemnité pour frais de communication est également doublée pour le Président du Conseil d Administration. Le Président du Conseil d Administration préside également la Commission Paritaire et le Fonds de pension. Mme Martine Durez et M. Theo Dilissen sont membres du Conseil d Administration du Fonds de pension. Ils ne reçoivent pas de jetons de présence pour ces participations. En ce qui concerne l exécution de leur mandat, les administrateurs ne perçoivent pas de rémunération basée sur les résultats, telle que des bonus ou des programmes d intéressement à long terme. Ils ne bénéficient pas non plus d avantages liés aux plans de pension. Aperçu de la rémunération des administrateurs Le tableau ci-contre présente la rémunération des différents administrateurs pendant l exercice fiscal 2013, sur la base de leurs activités et de leur participation aux réunions du Conseil d Administration et des comités.

66 Politique de rémunération Belgacom mène une politique de rémunération innovante, régulièrement évaluée et mise à jour par le biais d une étroite collaboration avec des universités et des forums externes consacrés aux ressources humaines. Les politiques de rémunération des membres du personnel de Belgacom sont déterminées dans un processus de dialogue avec le Conseil d Administration ainsi que les partenaires sociaux. Au vu de son historique en tant qu entreprise publique, Belgacom présente certaines différences, dans sa dynamique et sa structure, par rapport au secteur privé. Ces différences ont eu une influence considérable sur l évolution de sa politique de rémunération. Le département des ressources humaines de Belgacom a ainsi développé des programmes créatifs et modulables afin de remplir ses obligations liées au caractère statutaire de l emploi de certains membres du personnel et a introduit de nouveaux éléments qui ont permis d harmoniser les politiques entre membres du personnel statutaires et contractuels. Principes généraux de Belgacom en matière de rémunération Pour réaliser nos objectifs d entreprise sur un marché télécom global hautement concurrentiel et en rapide évolution, nous avons besoin de collaborateurs qualifiés, talentueux et engagés, travaillant dans une culture de haute performance. Pour promouvoir cette culture, il est primordial de disposer d un programme global de rémunération compétitif («global rewards program»). Les objectifs du programme de rémunération globale de Belgacom sont les suivants : >> Stimuler la performance afin d engendrer une croissance rentable à long terme ; >> Stimuler la prise de responsabilités afin de renforcer la stratégie d entreprise et la culture désirée ; >> Proposer une rémunération juste et équitable au personnel, tant statutaire que contractuel, conformément aux pratiques du marché ; >> Identifier et valoriser les hautes performances ; >> Lier la rémunération aux succès individuels et globaux de Belgacom ; >> Permettre à Belgacom d attirer et de retenir les talents du marché à tous les niveaux ; >> Combiner les besoins et responsabilités des collaborateurs et de leurs familles avec ceux de l entreprise et de la société comme un tout. Belgacom conserve - et modernise - également des instruments puissants relevant du secteur public, tels que des avantages en matière d équilibre entre vie professionnelle et vie privée (p.ex. soins aux enfants malades, hospitalisation, etc.) et d assistance sociale. Il incombe au département Work-Life de Belgacom de combiner les besoins et responsabilités des membres du personnel et de leurs familles avec ceux de l entreprise et de la société dans son ensemble. Au fil des années, Belgacom a décroché plusieurs prix consacrant les efforts continus qu elle déploie pour ménager à son personnel un environnement de travail équilibré. Le programme de rémunération global suit et soutient cet objectif et cette mission. Rémunération du top management Objectifs et principes de la politique de rémunération du top management de Belgacom Belgacom a élaboré pour ses top managers une politique de rémunération équilibrée qui prévoit une rémunération compétitive et attrayante sur le marché, conciliant les intérêts de la direction avec ceux des actionnaires. L entreprise entend attirer et conserver des cadres supérieurs de valeur pour son Comité de direction et ses top managers. Elle entend récompenser les personnes qui jouent un véritable rôle d exemple et qui s engagent à fournir un niveau de performance élevé et à respecter les valeurs de l entreprise. Les top managers bénéficient de programmes de rémunération spéciaux mettant l accent sur les principes de la stratégie de Belgacom afin de récompenser de manière cohérente les performances élevées des individus et de l entreprise. Afin de se distinguer des autres employeurs, Belgacom cherche à exceller dans le paquet global offert, en prévoyant non seulement une rémunération en espèces, mais aussi de nombreux autres avantages. L un des principes fondamentaux de sa politique de rémunération réside dans le degré de liberté laissé aux top managers quant au choix de leur mode de rémunération. Élément de rémunération Salaire de référence Rémunération variable à court terme Intéressements à long terme Description Implique une compensation fixe en espèces Vise la médiane du groupe de référence sur le marché de l emploi Est basée sur le degré de réalisation de mesures annuelles, dont 30 % correspondant à la performance du Groupe Belgacom, 40 % à celle des Business Units et 30 % à la performance en termes de leadership individuel. Le Plan de Valeur de Performance est basé sur le Rendement Total des Actionnaires de Belgacom par rapport à un panier préalablement défini d opérateurs télécoms européens. Rôle stratégique Attraction Récompenser les prestations réalisées au quotidien Impulser et récompenser la performance annuelle de Belgacom Impulser et récompenser les décisions stratégiques et commerciales judicieuses en faveur de la prospérité à long terme de Belgacom Aligner les intérêts de la direction et ceux des actionnaires Stimuler les prestations à long terme des top managers et les aligner avec les attentes des actionnaires Assurer la prise de décisions opportunes pour la prospérité de Belgacom Attirer et conserver les talents Définition du niveau de compensation Le Comité de Nomination et de Rémunération définit la politique de rémunération du top management et détermine les paquets de rémunération individuels de l Administrateur Délégué et des membres du Comité de direction. Le positionnement de ces paquets est régulièrement vérifié en comparant la rémunération de la haute direction à celle pratiquée dans les sociétés du BEL 20 (secteur financier exclu) et dans d autres sociétés du secteur européen des télécommunications et de l ICT. La politique actuelle de rémunération ne prévoit pas de dispositions contractuelles spécifiques en matière de récupération en faveur de l entreprise, de la rémunération variable des top managers accordée sur la base d informations financières erronées, et ce sans transgresser les différentes dispositions légales applicables entre les personnes concernées et l entreprise (notamment les lois du 7 juillet 1978, du 12 avril 1965 et du 10 février 2003 concernant les possibilités de remboursement par les employés en cas de fraude, de fautes graves et fautes mineures répétées, de responsabilité civile, etc.). GOUVERNANCE D ENTREPRISE 63 BELGACOM RAPPORT D ACTIVITÉS 2013

67 Indicateurs de performance clés au niveau du Groupe >> Le principal indicateur financier utilisé est le cash-flow opérationnel. BELGACOM RAPPORT D ACTIVITÉS 2013 GOUVERNANCE D ENTREPRISE 64 Politique de rémunération du Comité de direction La relation entre les différents éléments de la rémunération des membres du Comité de direction et de l ancien Administrateur Délégué de Belgacom est illustrée ci-dessous. Les chiffres traduisent le poids effectif et relatif des différentes composantes de la rémunération payée en SCHÉMA 1 : IMPORTANCE RELATIVE DES DIFFÉRENTS ÉLÉMENTS DE LA RÉMUNÉRATION (KPI ATTEINTS À 100 %) ANCIEN ADMINISTRATEUR DÉLÉGUÉ * 60% RÉMUNÉRATION DE BASE 34% RÉMUNÉRATION VARIABLE À COURT TERME 5,5% PRIMES D ASSURANCE GROUPE 0,5% AUTRES AVANTAGES COMITÉ DE DIRECTION DE BELGACOM 46% RÉMUNÉRATION DE BASE 20% RÉMUNÉRATION VARIABLE À COURT TERME 20% RÉMUNÉRATION VARIABLE À LONG TERME 12% PRIMES D ASSURANCE GROUPE 2% AUTRES AVANTAGES * Perte de la rémunération variable à long terme de l ancien Administrateur Délégué, en raison de la résiliation en 2013 de son contrat d emploi >> Parmi les indicateurs non financiers essentiels figurent la Simplicité et l Expérience client, qui mesurent les progrès réalisés dans la simplification et l optimisation des processus et l expérience du client en tant qu utilisateur, ainsi que la transformation des coûts, mesurant les progrès en matière d efficacité dans la maîtrise des coûts. >> Autre indicateur opérationnel : l indice d engagement du personnel, qui mesure chaque année l engagement organisationnel et fonctionnel, l alignement stratégique et l agilité des membres du personnel. Indicateurs de performance clés au niveau des Business Units >> Les indicateurs de performance clés concernent notamment la convergence, la gestion de la valeur, le «solution centricity», la transformation du réseau fixe et mobile et le nombre de nouveaux clients dans les domaines de la téléphonie fixe et mobile, de l internet et de la télévision. Rémunération de base Les salaires de base du Comité de direction sont revus annuellement par le Comité de Nomination et de Rémunération, sur la base d une analyse approfondie de l évaluation de la performance et du potentiel fournie par l Administrateur Délégué, ainsi que de données de comparaison externes. La société entend aligner la rémunération du top management avec la médiane du marché. La rémunération de base comprend le salaire de base perçu dans la fonction d Administrateur Délégué et de membre du Comité de direction pour l année concernée. L ancien Administrateur Délégué, Didier Bellens, était également un membre non rémunéré du Conseil d Administration. En 2013, les membres du Comité de direction n ont pas perçu d augmentation de mérite. Les variations de montants résultent essentiellement de l indexation légale de janvier 2013 et de changements intervenus dans la composition du Comité de direction. Aperçu de la rémunération du top management La politique de rémunération du Comité de direction repose sur des éléments fixes, soit la rémunération de base, les avantages de pension et postérieurs à l emploi ainsi que d autres avantages, et des éléments variables basés sur la performance, soit la rémunération variable à court terme et la rémunération variable à long terme. La rémunération variable annuelle est calculée en confrontant les performances à des indicateurs de performance clés fixés par le Conseil d Administration sur avis du Comité de Nomination et de Rémunération. Pour 2013, ces indicateurs de performance incluaient des indicateurs financiers et non financiers, tant à l échelle du Groupe que des Business Units. Les résultats de ces KPI sont suivis et communiqués sur une base régulière. Les résultats se fondent sur des chiffres financiers audités et des indicateurs non financiers mesurés par des agences internes et externes spécialisées dans les études de marché et de clientèle, dont les processus sont régulièrement audités. RÉMUNÉRATION DE BASE (EN MILLIERS EUR) AVANT CHARGES SOCIALES PATRONALES 963, , , ,0 ANCIEN ADMINISTRATEUR DÉLÉGUÉ * COMITÉ DE DIRECTION ** * La variance 2012/13 s explique par l index et le paiement sur 11 mois au lieu de 12, mais le pécule de vacances de 2014 a dû être payé lors du départ. ** La variance 2012/13 s explique par les changements survenus au sein du Comité de direction.

68 Rémunération variable à court terme La société entend positionner la rémunération variable à court terme du top management en fonction de la réalisation des objectifs à 100%. En cas de performance excellente au niveau de l entreprise, de la Business Unit et individuelle, la rémunération variable à court terme peut dépasser les 100 %, avec un plafond à 200 %. Le système de rémunération variable du Groupe Belgacom reflète les valeurs du Groupe, souligne les forces des Business Units et stimule les réalisations individuelles. SCHÉMA 2: LA POLITIQUE DE RÉMUNÉRATION DU COMITÉ DE DIRECTION DE BELGACOM TIENT COMPTE DE LA PERFORMANCE AU NIVEAU DU GROUPE, DES BUSINESS UNITS ET DES PERSONNES INDIVIDUELLES GROUPE La rémunération variable à court terme inclut le bonus réel versé en 2013 pour les performances de l année Une courbe de paiement linéaire comprenant une limite minimum et maximum est adoptée pour chacune des trois composantes de la rémunération variable à court terme. SCHÉMA 3 : RÉMUNÉRATION VARIABLE À COURT TERME : COURBE DE PAIEMENT % BUSINESS UNIT 40% INDIVIDUEL 30% 30% RESULTAT LIMITE MINIMUM OBJECTIF LIMITE MAXIMUM Cette courbe détermine la rémunération variable à court terme octroyée aux membres du Comité de direction en fonction du résultat effectif de chaque KPI. Dans le cas de l ancien Administrateur Délégué, ce pourcentage est plafonné à 150 % en Le résultat est en effet calculé sur la base d une formule préalablement définie qui tient compte des différents KPI selon des pondérations prédéfinies. En ce qui concerne la rémunération variable à court terme en 2013, liée à la performance de l année 2012, les KPI suivants étaient définis au niveau du Groupe : >> Cash-flow libre >> Transformation de coûts >> Simplicité & Expérience client >> Indice de fidélité des employés Outre les résultats de l activité et ceux de l entreprise, la performance individuelle intervient pour 30 % dans le niveau de rémunération globale à court terme. La performance individuelle est évaluée par rapport à des objectifs mesurables préalablement définis. À partir de l année 2013, si les paramètres pris en considération dans la formule de calcul de la rémunération variable à court terme allouée à l Administrateur Délégué et aux membres du Comité de direction restent inchangés, leur poids a été revu afin que l impact des KPI du Groupe prévale par rapport aux KPI individuels et des Business Units. La rémunération variable à court terme est versée par le biais d une des options du «Plan d Intéressement à Court Terme». L Administrateur Délégué et les membres du Comité de direction peuvent choisir de recevoir leur rémunération variable à court terme en bonus en espèces ou dans le cadre d un «Plan d Achat d Actions avec Décote». Le Plan d Achat d Actions avec Décote donne le droit d acheter des actions attribuées en bénéficiant d une décote de 16,66 %. La valeur de cette décote de 16,66 % équivaut à la valeur brute du résultat des intéressements à court terme. Le membre du top management finance lui-même 83,34 % du prix total d achat de l action, ce qui nécessite un investissement personnel considérable. Les actions sont des actions propres bloquées pendant une période de deux ans. L ancien Administrateur Délégué a choisi de recevoir sa rémunération variable à court terme par le biais d un Plan d Achat d Actions avec Décote. La majorité du Comité de direction a opté pour un bonus en espèces. La rémunération variable à court terme de l ancien Administrateur Délégué a augmenté proportionnellement à sa performance de 2012, celle des membres du Comité de direction ayant pour sa part diminué par rapport à l année précédente. La baisse touchant les membres du Comité de direction est due pour l essentiel aux changements survenus dans la composition de ce même Comité de direction. RÉMUNÉRATION VARIABLE À COURT TERME (EN MILLIERS EUR) AVANT CHARGES SOCIALES PATRONALES 513, ,1 581, ,1 ANCIEN ADMINISTRATEUR DÉLÉGUÉ COMITÉ DE DIRECTION GOUVERNANCE D ENTREPRISE 65 BELGACOM RAPPORT D ACTIVITÉS 2013

69 BELGACOM RAPPORT D ACTIVITÉS 2013 GOUVERNANCE D ENTREPRISE 66 Rémunération variable à long terme En 2013, Belgacom a lancé un nouveau plan d intéressement à long terme pour son top management. Ce Long-Term Performance Value Plan (plan à long terme de valeur de performance) remplace le Plan d Options sur Actions. Le nouveau plan a été conçu pour maintenir une politique de rémunération du top management équilibrée et attrayante d une part et conforme aux attentes des actionnaires d autre part. Le Plan de Valeur de Performance de Belgacom se veut totalement axé sur la performance et la transparence, aligné sur les meilleures pratiques du marché et inspiré par les plans d intéressement à long terme d autres entreprises de télécommunications européennes. Dès lors, le Rendement Total des Actionnaires a été choisi comme critère de performance pour stimuler la performance à long terme attendue de notre top management et l aligner sur les intérêts des actionnaires. Le Rendement Total des Actionnaires de Belgacom sera mesurée par rapport au Rendement Total des Actionnaires d un panier de 12 autres opérateurs télécoms européens, pour la première fois à l issue d un cycle de performance de 3 ans. Dans le cadre de ce Plan de Valeur de Performance à Long Terme, les montants octroyés sont bloqués pour une période de 3 ans, après quoi les Valeurs de Performance sont acquises. Après cette période, la possibilité d exercer des droits dépend de la performance du Rendement Total des Actionnaires comparée à celle d un groupe d entreprises de référence. LES ENTREPRISES SUIVANTES SONT PRÉSENTES DANS LE PANIER : Deutsche Telekom Telekom Austria Group Telefonica KPN Portugal Telecom TeliaSonera Vodafone BT Telecom Italia TDC Swisscom France Telecom «PLAN DE VALEUR DE PERFORMANCE» À LONG TERME (EN MILLIERS EUR) AVANT CHARGES SOCIALES PATRONALES ANCIEN ADMINISTRATEUR DÉLÉGUÉ * COMITÉ DE DIRECTION * Les droits sont perdus du fait de la résiliation du contrat d emploi de l Administrateur Délégué Niveau de paiement Le niveau de paiement a été conçu conformément au principe pay for performance (rémunération liée à la performance) et dépend de la rémunération variable à court terme et de la performance de Belgacom. Le Plan de Valeur de Performance à long terme est conçu de manière à valoriser le personnel de direction lorsque leur rendement est «supérieur à la médiane» et à limiter cette valorisation, voire la réduire à zéro, lorsque ce rendement est «inférieur à la médiane». Options de paiement Les membres du Comité de direction peuvent choisir entre 3 options différentes de paiement, soit un paiement en espèces, un Plan d Achat d Actions avec Décote, et des actions Belgacom. Ces options ne peuvent être combinées et l option de paiement privilégiée doit être communiquée à la date de l octroi. Le choix est irréversible. En 2013, tous les membres du Comité de direction ont choisi l option de paiement en espèces. Ce choix implique la prise en compte de charges sociales patronales. Un aperçu année après année de l évolution du Plan de Valeur de Performance à long terme ne peut être fourni en raison des modifications apportées au concept du plan d intéressement à long terme. De 2004 à 2012, l ancien Administrateur Délégué ainsi que les membres du Comité de direction se sont vu accorder des options sur actions. Le tableau ci-après présente un aperçu du plan des options sur actions restant de l ancien Administrateur Délégué et des autres membres du Comité de direction. APERÇU DU PLAN D OPTIONS SUR ACTIONS : ADMINISTRATEUR DÉLÉGUÉ ET AUTRES MEMBRES DU COMITÉ DE DIRECTION Didier Bellens Bruno Chauvat Michel Georgis Dominique Leroy Geert Standaert Ray Stewart Bart Van Den Meersche Au 1 er janvier 2013, options sur actions restantes d années antérieures : Options sur actions exercées pendant l année rapportée Options sur actions expirées pendant l année du rapport Options sur actions perdues pendant l année du rapport Nombre Année d attribution des options exercées et Nombre Année d attribution des options expirées Nombre Année d attribution des options perdues , TOTAL

70 APERÇU DE LA RÉMUNÉRATION DE BASE ET DE LA RÉMUNÉRATION VARIABLE DE L ADMINISTRATEUR DÉLÉGUÉ ET DES AUTRES MEMBRES DU COMITÉ DE DIRECTION Rémuneration Ancien Administrateur Délégué Autres membres du Comité de direction Rémunération de base Rémunération variable à court terme Rémunération variable à long terme en actions Rémunération variable basée sur le Plan de Valeur de Performance à long terme Avantages de pension et avantages postérieurs à l'emploi Autres avantages TOTAL (hors charges sociales patronales) Charges sociales patronales TOTAL (charges sociales patronales comprises) Avantages de pension et avantages postérieurs à l emploi L ancien Administrateur Délégué était affilié à un plan de pension complémentaire qui prévoyait une contribution annuelle de ,42 EUR, indexée chaque année. Les membres actuels du Comité de direction bénéficient d un plan d avantages définis (Defined Benefit Plan). Autres avantages Le Groupe Belgacom entend stimuler son top management en lui offrant toute une série d avantages compétitifs sur le marché. Outre leur rémunération, l Administrateur Délégué et les autres membres du Comité de direction bénéficient d avantages tels qu une assurance de soins de santé, un véhicule et d autres avantages en nature. Aperçu Le tableau ci-dessus indique la rémunération et les autres avantages accordés directement ou indirectement aux membres du Comité de direction de Belgacom en 2013, par Belgacom ou par toute autre entreprise du Groupe Belgacom (avantages basés sur la rémunération brute ou nette, en fonction du type d avantage). L évolution des chiffres d une année à l autre résulte principalement : >> des changements survenus dans la composition de l équipe de direction ; >> de l indexation légale des salaires (janvier 2013) ; >> du taux d acceptation limité du plan 2012 d option sur actions ; >> du nouveau concept de Plan de Valeur de Performance à long terme. Principales dispositions des relations contractuelles Accord contractuel relatif à l ancien Administrateur Délégué En mars 2009, Didier Bellens s est vu confier un nouveau mandat de six ans en qualité d Administrateur Délégué. Il disposait d un contrat d administrateur délégué à titre d indépendant. Il était néanmoins soumis au paiement des cotisations de sécurité sociale dans le chef du travailleur, conformément à l article 11, 1 er, de l arrêté royal du 28 novembre Cet article stipule que «l application de la loi est étendue aux organismes (d intérêt public et aux entreprises publiques autonomes) ainsi qu aux personnes qui consacrent, en qualité de mandataires et contre rémunération, leur principale activité à la gestion ou à la direction journalière (de ces organismes et entreprises), pour autant qu un régime statutaire de pension ne soit pas applicable à ces personnes.» Le contrat de travail de l ancien Administrateur Délégué a pris fin en novembre Aucune indemnité de rupture de contrat n a été versée. Clauses L ancien Administrateur Délégué est soumis à une clause de non-concurrence lui interdisant de travailler, pendant 12 mois à compter de son départ du Groupe, pour un concurrent du Groupe Belgacom en Belgique et dans les pays où le Groupe Belgacom génère au moins 5 % de ses revenus consolidés. Une activation de cette clause par Belgacom lui aurait valu de recevoir un montant équivalant à une année de salaire à titre de compensation. Cette clause n a pas été activée lors du départ de l ancien Administrateur Délégué. GOUVERNANCE D ENTREPRISE 67 BELGACOM RAPPORT D ACTIVITÉS 2013 Les membres du Comité de direction qui sont soumis à une clause de non-concurrence leur interdisant de travailler pendant 12 mois après le départ du Groupe pour tout autre opérateur fixe ou mobile, titulaire d une licence et actif sur le marché belge, bénéficieront d un montant égal à six mois de salaire à titre de compensation. Dominique Leroy, Bruno Chauvat, Geert Standaert, Ray Stewart et Bart Van Den Meersche disposent, dans leurs contrats respectifs, d une clause de résiliation prévoyant une indemnité de rupture égale à un an de rémunération. Michel Georgis dispose d une clause de résiliation prévoyant une indemnité de rupture égale à un an de rémunération, à laquelle s ajoute un mois de rémunération par année d ancienneté acquise et plafonnée à deux ans de rémunération après 12 ans de service.

71 INFORMATIONS GÉNÉRALES BELGACOM RAPPORT D ACTIVITÉS 2013 INFORMATIONS GÉNÉRALES 68 Raison sociale et forme juridique L entreprise publique autonome Belgacom est une société anonyme belge de droit public conformément à la loi du 21 mars 1991 portant réforme de certaines entreprises publiques économiques. La société est soumise aux dispositions légales et réglementaires du droit commercial applicables aux sociétés anonymes dans toutes les matières non expressément définies (ou imposées) par la loi du 21 mars 1991 ou toute autre législation spécifique en vigueur. Siège social Belgacom S.A. de droit public Bd du Roi Albert II, 27 B-1030 Bruxelles T.V.A. BE , R.P.M. Bruxelles Consultation des documents de l émetteur Les documents publics relatifs à l émetteur sont disponibles à la consultation au siège social. Date de constitution La société a été constituée sous forme d entreprise publique autonome, régie par la loi du 19 juillet 1930 créant la Régie des télégraphes et des téléphones (RTT). La transformation de Belgacom en société anonyme de droit public a été opérée par l arrêté royal du 16 décembre 1994, publié au Moniteur belge le 22 décembre 1994 et entré en vigueur le même jour. Objet social Conformément à l article 3 de ses statuts, la société a pour objet: 1. le développement de services, en Belgique ou ailleurs, dans le domaine des télécommunications; 2. l exécution de toutes les opérations destinées à promouvoir directement ou indirectement ses activités ou à permettre une utilisation optimale de son infrastructure; 3. la prise de participation dans des organismes, sociétés ou associations publics ou privés, existants ou à créer, belges, étrangers ou internationaux, laquelle peut contribuer directement ou indirectement à son objet social; 4. la fourniture de services de radiodiffusion et de télévision. Avertissement Les présentes informations contiennent des déclarations prévisionnelles, y compris des déclarations relatives aux opinions et aux attentes de la société. Ces déclarations se basent sur les plans actuels, les estimations et les projections de la société, ainsi que sur ses attentes quant aux conditions et événements extérieurs. Les déclarations prévisionnelles comportent nécessairement des risques et des incertitudes et ne sont valables qu à la date où elles sont formulées. La société ne s engage nullement à les réviser à la lumière d informations nouvelles ou d événements ultérieurs, sauf dans les limites requises par la loi. La société attire l attention des investisseurs sur le fait qu un nombre important de facteurs peuvent entraîner des résultats sensiblement différents de ceux annoncés dans une quelconque déclaration prévisionnelle. Pour toute information : Dirk Lybaert Executive Vice President Corporate Affairs Bd du Roi Albert II, 27 B Bruxelles Tél: hello@belgacom.be Pour les informations RSE : Xavier Dekeuleneer Head of Corporate Social Responsibility Bd du Roi Albert II, 27 B Bruxelles Tél: csr@belgacom.be Pour les informations financières : Nancy Goossens Vice President Investor Relations Bd du Roi Albert II, 27 B Bruxelles Tél: Fax: investor.relations@belgacom.be Notre rapport est imprimé sur papier Satimat green, papier couché 60% fibres recyclées / 40% fibres vierges FSC. Des encres végétales et des colles sans solvant sont utilisées. Les plaques usagées et les récipients d encre sont recyclés. Les déchets de papier sont aspirés pour compactage et recyclage par des organismes agréés. L imprimeur est certifié FSC mais également PEFC. Editeur responsable: Dirk Lybaert Executive Vice President Corporate Affairs Bd du Roi Albert II, 27 B Bruxelles Concept, coordination et contenu: Anne-Françoise Streel Corporate Communication Project Manager Design et pré-presse : Chris Communications Impression : Snel Photographies : Jean-Michel Byl, Getty images, Istock et Belgacom Visitez le site internet de Belgacom : Le rapport annuel de Belgacom est également édité en néelandais et en anglais.

72 belgacom FINANCIAL REPORT 2013

73 FINANCIAL KEY FIGURES Income Statement (EUR million) Restated (4) 2013 Total income 5,540 5,458 6,100 6,065 5,978 5,990 6,603 6,406 6,462 6,318 before non-recurring items Non-recurring income Total income 5,540 5,696 6,100 6,065 5,986 6,065 7,040 6,417 6,462 6,318 Non-recurring expenses EBITDA (1) before non-recurring items 2,394 2,214 2,149 2,077 1,990 1,955 1,984 1,912 1,801 1,713 EBITDA (1) 2,353 2,098 2,149 2,031 1,905 1,967 2,428 1,897 1,786 1,699 Depreciation and amortization Operating income (EBIT) 1,611 1,372 1,347 1,256 1,161 1,261 1,619 1,141 1, Net finance income / (costs) Income before taxes 1,584 1,436 1,451 1,258 1,053 1,144 1,517 1, Tax expense Non-controlling interests Net income (Group share) , Cash flows and Capital Expenditures (EUR million) Restated (4) 2013 Cash flows from operating activities 1,899 1,883 1,643 1,581 1,552 1,406 1,666 1,551 1,480 1,319 Cash paid for acquisitions of intangible assets and property, plant and equipment Cash flows from / (used in) , other investing activities Free cash flow (2) 1,421 1,575-1,313 1, Cash flows from / (used in) -1,658-1, , , financing activities Net increase / (decrease) of cash and cash equivalents Balance sheet (EUR million) As of 31 December Restated (4) 2013 Balance sheet total 5,368 5,831 7,300 7,325 7,782 7,450 8,511 8,312 8,243 8,417 Non-current assets 3,963 3,808 5,504 5,072 5,564 5,505 6,185 6,217 6,192 6,254 Investments, cash and cash equivalents Shareholders' equity 2,223 2,221 2,391 2,520 2,271 2,521 3,108 3,078 2,881 2,846 Non-controlling interests Liabilities for pensions, other 760 1, post-employment benefits and termination benefits Net financial position ,636-1,167-1,835-1,716-1,451-1,479-1,601-1,815 Belgacom share - key figures Restated (4) 2013 Basic earnings per share before non-recurring items (EUR) Basic earnings per share (EUR) Diluted earnings per share (EUR) Dividend per share, gross (in EUR) Interim/special dividend per share, gross (in EUR) Weighted average number of ordinary 358,612, ,406, ,621, ,017, ,179, ,475, ,138, ,963, ,011, ,759,360 shares (3) Share buyback (EUR million) Data on employees Restated (4) 2013 Number of employees 16,933 16,335 18,180 17,942 17,371 16,804 16,308 15,788 15,859 15,699 (full-time equivalents) Average number of employees 17,108 16,388 18,163 17,995 17,465 16,878 16,270 15,699 15,952 15,753 over the period Total income before non-recurring 323, , , , , , , , , ,080 items per employee (EUR) Total income per employee (EUR) 323, , , , , , , , , ,080 EBITDA (1) before non-recurring items 139, , , , , , , , , ,735 per employee (EUR) EBITDA (1) per employee (EUR) 137, , , , , , , , , ,851 Ratios Restated (4) 2013 Return on Equity 42,2% 43,1% 40,7% 38,8% 37,5% 35,6% 30,9% 24,9% 25,0% 22,5% Gross margin 73,6% 71,5% 67,1% 66,8% 67,0% 65,2% 60,0% 60,7% 59,6% 59,5% Net debt / EBITDA before non-recurring items 0,0-0,2 0,8 0,6 0,9 0,9 0,7 0,8 0,9 1,1 (1) Earnings Before Interests, Taxes, Depreciation and Amortization (2) Cash flow before financing activities (3) i.e. excluding Treasury shares (4) As a consequence of the adoption in 2013 of IAS 19R with retrospective application, the new accounting principles have been applied to 2012 figures

74 CONSOLIDATED MANAGEMENT REPORT MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS Belgacom Group Group revenue of EUR 6,318 million; 2.2% lower than for 2012 Group EBITDA 1 of EUR 1,713 million, i.e. -4.9% lower than for 2012 Full-year EBITDA margin of 27.1% Belgacom generated EUR 505 million Free Cash Flow in 2013 Revenues 5,990 Revenue (in mio ) before non-recurring items 6,603 6,406 6,462 6, The Belgacom Group ended the year 2013 with total revenue of EUR 6,318million, or 2.2% lower than for Capital gains 2 and other one-off 3 impacts excluded, the Belgacom Group revenue was 2.9% or EUR 186 million lower than the previous year. Like its peers in the European Telecoms industry, Belgacom saw its revenue pressured by regulatory measures 4, including both local and European imposed price reductions. This caused a EUR 85 million revenue loss for the Belgacom Group, or 1.3%. Furthermore, as a result of the sale of some its The Phone House stores 5, Belgacom generated less revenue from this sales channel. Belgacom s revenue was significantly impacted by a tough mobile market, resulting from the new Belgian Telecom law, in force since October 2012, and more aggressive price competition on the Belgian Mobile market. Revenue Evolution (in mio ) 6, ,318 FY 2012 Net Impact One-offs Regulatory impact Underlying CBU Underlying EBU Underlying SDE Underlying S&S BICS Intra-group elimination FY 2013 In particular, Belgacom saw its mobile revenue going down due to the loss of mobile postpaid and prepaid customers, and because of lower revenue per user due to the introduction of new attractive mobile prices. Even though Belgacom s ramping down of mobile prices and its successful retention actions could fairly quickly restore the customer churn levels and turn the mobile postpaid customer base back to growth, the financial effect was substantial for both the Consumer and Enterprise segment. 1 EBITDA before non-recurring items 2 In 2013, the Belgacom Group realized EUR 31 million capital gains on the sale of technical buildings in the framework of its network simplification program. 3 One-off amounts impacting the year-over-year variance, including accounting adjustments and provision reversals. 4 Regulatory price reductions on Roaming rates and Mobile Termination Rates. 5 As part of the agreement with the Competition Council, Belgacom sold some of The Phone House stores in November

75 The revenue pressure on Mobile was to some extent offset by a firm financial performance of the Fixed business, with growing revenue for Fixed Internet and TV services. For both services, Belgacom grew its customer base over the year 2013 and saw its revenue per customer slightly increase as a result of price indexation. Belgacom s International Carrier Segment, BICS, also showed a positive revenue contribution compared to the previous year driven by a firm uptake in Mobile revenue ,108 2,087 Operating expenses (in mio ) before non-recurring items ,107 1,117 1,126 1,142 2,642 2,517 2,611 2,561 Non HR HR COS 16,804 Headcount evolution (in FTE) 16,308 15,788 15,859 15, * Operating expenses The Belgacom Group s total operating expenses for 2013 amounted to EUR 4,605 million before non-recurring items, which is 1.2% lower compared to the year before. The Belgacom Group ended the year 2013 with EUR 2,561 million Cost of Sales, i.e. 1.9% lower than the previous year. Oneoffs 6 excluded, Belgacom s Cost of Sales was 0.9% lower. In addition to the positive effect from Belgacom s efforts to reduce costs through value management, the favorable evolution was driven by lower costs related to The Phone House as some of the stores were sold, and a positive impact from the lowered Mobile Termination Rates. The lower costs from the customer segments were partly offset by higher costs for BICS. The 2013 HR-expenses of EUR 1,142 million were up +1.4% versus This increase was mainly driven by the inflationbased wage indexation in January 2013, for a large part offset by the year-on-year reduction in headcount to 15,699 fulltime equivalents (-160 FTEs) and more capitalized manpower resulting from Belgacom s network and IT simplification projects in Early 2013, the last wave of employees which signed up for the Tutorship restructuring program, left Belgacom. This was partly offset by some business-critical hiring. The 2013 non-hr expenses for the Belgacom Group were down by 2.3% to a total of EUR 903 million, benefitting from continued company-wide cost containment efforts, and the lower costs related to The Phone House. This largely offset the impact in 2013 from resources required for Belgacom s simplification projects within the Service Delivery Engine segment. EBITDA 32.6% 1,955 1,984 EBITDA (in mio ) 30.0% 29.8% 27.9% 27.1% 1,912 1,801 1, * 2013 The Belgacom Group reported EUR 1,713 million EBITDA 7 for 2013, or 4.9% less than for Capital gains 8 and other one-off 9 impacts excluded, the Belgacom Group EBITDA was 8.7% or EUR 160 million lower than the previous year. Regulatory measures had a negative impact for a total amount of EUR 48 million, or -2.7%. The remaining decrease in EBITDA is mainly driven by a lower direct margin within the two customer segments. 6 Accounting adjustments recorded in the second quarter 2012 following the adoption of the New Telecom law and an accounting reallocation in the third quarter Before non-recurring items 8 In 2013, the Belgacom Group realized EUR 31 million capital gains on the sale of technical buildings in the framework of its network simplification program. 9 One-off amounts impacting the year-over-year variance, including accounting adjustments, impairment and provision reversals. 3

76 EBITDA Evolution (in mio ) 1, ,713 FY 2012 One-offs 2012 One-offs 2013 Regulatory impact Underlying CBU Underlying EBU Underlying SDE Underlying S&S BICS FY 2013 Tax Expense Effective tax rate 21.0% 21.6% 25.3% 19.5% 20.7% The effective tax rate was 20.7% for the year This is slightly above the effective rate of 19.5% for the year 2012 which included an accelerated use of tax losses. The 2013 tax rate results from the application of the general principles of Belgian tax and international law * * Normalized effective tax rate, excluding the non-recurring non-taxable gain of EUR 436 million CAPEX Capex (in mio ) 2013 Capex per BU (in mio ) % 17% 1% 4% CBU EBU BICS SDE 75% S&S The Belgacom Group s invested amount for the full-year 2013 totaled EUR 852 million, or 13.5% of Group revenue. This is EUR 972 including the 800 MHz spectrum license which Belgacom obtained for the minimum price of EUR 120 million. With network quality being an important differentiator in a more intense Belgian competitive market, investments in the Fixed and Mobile networks represent the majority of invested amounts. Apart from ongoing basic network investments for renewal and expanding capacity, Belgacom invested in increasing its download speeds on the broadband network through the implementation of Dynamic Line Management, an in-house developed technology, and started to prepare the network for the Vectoring roll-out in Furthermore, on the mobile side, Belgacom increased its mobile data speeds to 6 Mbps on average on 3G, rolled out Dual Carrier and continued to deploy the 4G technology, reaching over 50% outdoor coverage end-2013, with 4G availability in over 260 Belgian cities. The SDE&W division is also implementing a Network Simplification program and a company-wide IT change plan. 4

77 Free Cash Flow* FCF (in mio ) Belgacom ended the year 2013 with EUR 505 million of Free Cash Flow or EUR 186 million less than for the same period of 2012, mainly due to higher income tax payments, higher cash paid for Capex, and lower EBITDA partially offset by a positive evolution in the working capital. The FCF does not include the Capex acquisition of the 800 Mhz spectrum license paid over a 20-year period (EUR 120 million). Acquisition and financing are treated as a non-cash transaction. The 2013 reimbursement of EUR 6 million is included in the financing activities of the cash flow statement * Cash flow before financing activities Net financial position Compared to end-2012, the net financial debt increased by EUR 214 million to EUR 1,815 million per end of 2013 as the cash returned to shareholders in the form of dividends exceeded the 2013 Free Cash Flow. The outstanding long-term gross financial debt (re-measured at fair value) amounted to EUR 1.9 billion at the same date. The outstanding amount of EUR 114 million from the deferred payment arrangement for the 800 MHz license is not included in the net financial debt. Net financial position (in mio ) -1, , Net debt December 2012 FCF Dividends Non controlling interests Net sale of treasury shares Other Net debt December

78 Consumer Business Unit - CBU Consumer segment generated EUR 2,226 million revenue in 2013, down 4.1% from 2012 The disruption in the mobile market significantly reduced Mobile revenue Revenue growth from solid Fixed business provided some relief Good customer growth in 2013 for TV, Internet and Mobile postpaid Full-year segment result of EUR 971 million, i.e. a 2% decline compared to 2012 CBU revenues Revenue (in mio ) before non-recurring items 2,414 2,368 2,288 2,321 2, For the full-year 2013, CBU reported revenues of EUR 2,226 million or 4.1% less than for 2012 or -4.4% on a comparable basis 10. The year-over-year decrease is driven by the impact from the mobile disruption in the Belgian market. The increased price competition in combination with a new Telecom law, in force since October 2012, triggered an unprecedented volatility in the mobile market. Even though Belgacom succeeded in lowering churn levels early 2013, the prior Postpaid customer loss, a continued declining prepaid customer base, and the re-pricing of existing customers resulted in a significant loss of Mobile revenue. This was partly compensated for by a solid performance of fixed products, with both TV and Internet showing a sound revenue growth. Furthermore, regulatory measures reduced the 2013 revenue by EUR 27 million (-1.2%). This entails the effect from a further decline of Voice roaming tariffs, lower Mobile Termination Rates and the resulting decline in fixed -to-mobile tariffs, as well as the regulated capping of Mobile Data Roaming pricing. CBU Revenue Evolution (in mio ) 2, ,226 FY 2012 Net Impact One-Offs Regulatory impact Fixed Voice Fixed Data TV Mobile Service Revenue Subsidiaries Terminals & Others FY Excluding one-off accounting adjustments in 2012 and

79 Fixed voice revenue (in mio ) Fixed voice customers (in '000) 21.7 Fixed voice ARPU (in ) 2,028 1,933 1,818 1,718 1, * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units Belgacom generated EUR 410 million from Fixed Voice, or 3.4% less compared to The revenue pressure is mainly driven by a stable, though continued Fixed line erosion. In 2013, the consumer Fixed Voice customer base decreased by 84,000 lines. As a result, the Consumer segment ended 2013 with a total of 1,634,000 lines, 4.9% lower than the prior year. The ARPU, however, slightly increased to EUR 20.2 (+1.5%), positively impacted by price changes in Fixed Internet revenue (in mio ) Fixed Internet customers (in '000) Fixed Internet ARPU (in ) ,075 1,113 1,156 1,193 1, * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units Revenue from Fixed Internet grew 4.5% to EUR 354 million in This results from a combination of a growing customer base and some price changes in Driven by its successful Pack offers, the Consumer segment added 42,000 new Internet customers in the course of 2013, growing its customer base by 3.6% to 1,235,000. In 2013, the ARPU went up by 0.4% to EUR 26.6 as customer pricing was adjusted in exchange for more volume and speed. TV revenue (in mio ) TV customers (in '000) TV ARPU (in ) ,479 1,386 1, ,021 1,156 1,218 2nd stream HH Belgacom continued to grow its TV revenue, reaching EUR 267 million for This 13% revenue growth compared to 2012 resulted from Belgacom s successful convergent Pack sales, attracting 62,000 new households to Belgacom TV. By end 2013, Belgacom s TV customer base counted 1,218,000 TV households, or 1,479,000 when including multiple set-top boxes. Another revenue growth driver was the ARPU, supported by a price increase for rented settop boxes since February The 2013 ARPU increased to EUR 18.7, up 4.4% over the prior year. 7

80 Mobile Service Revenue (in mio ) Mobile customers (in '000) Mobile Blended ARPU (in ) , ,824 3,769 3,805 3,643 3, * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units The revenue generated by Belgacom s Consumer segment from Mobile services (i.e. combined revenue from Mobile Voice, Mobile Data and SMS) was significantly reduced in 2013 as a result of regulatory measures 11 and the mobile market disruption. This started mid-2012 and reached its zenith when the new Telecom law was adopted on 1 October In 2013, the consumer segment saw its revenue from Mobile services being reduced by EUR 119 million or 13% versus the prior year. This was due to a combination of postpaid customers lost in 2012, a decreasing prepaid customer base, and the effect of customers signing up for Belgacom s new, more attractive mobile price offers. Backed by its superior mobile network, attractive mobile offers and convergent Pack offers, Belgacom was able to restore the port-in/port-out balance fairly quickly, resulting in a net growth of 208,000 mobile postpaid Voice and Data cards. This brought the total postpaid base to 1,928,000 mobile cards by end Prepaid cards, however, continued to show a declining trend. The Consumer segment lost 283,000 prepaid cards, resulting in a total of 1,640,000 cards by end With mobile prices becoming more attractive, the blended mobile ARPU eroded to EUR 18.5, 8.9% lower compared to Lower regulated rates for Mobile Termination, Voice and Data Roaming 8

81 CBU operating expenses Total expenses (in mio ) 1,365 1,295 1,263 1,330 1, Segment result (in mio ) & margin 43.4% 45.3% 44.8% 42.7% 43.6% 1,048 1,073 1, Non-HR costs HR costs Cost of Sales The total expenses from the Consumer segment were EUR 1,255 million or 5.6% lower than previous year. The 2013 Cost of Sales ended 8.3% lower to reach EUR 611 million. This is the combined result of positive regulation effects, the divestment of part of The Phone House stores, as well as the benefits from a value management approach. The Consumer segment recorded EUR 349 million HR costs, 1.3% lower than for the prior year. The impact from the January 2013 inflation-based wage indexation was more than offset by the positive impact from the divestment of part of The Phone House stores. This divestment also positively impacted the non-hr costs, totalling EUR 294 million or 4.9% lower compared to Furthermore, costs were reduced through continued cost optimization efforts. The CBU full-year segment result amounted to EUR 971 million which is EUR 20 million or 2% below that of The yearon-year variance was impacted by a one-off accounting adjustment 12 and litigation provisions and a loss on disposal. Adjusted for these, the segment result was down by 5.4% from Apart from a negative impact from regulation for EUR 8 million, the segment decline was mainly driven by the pressure on the Direct Margin, partly compensated for by a lower cost base. The 2013 full-year contribution margin 13 was 43.6%. Subsidiaries: Tango & Scarlet Tango Revenue (in mio ) Tango Mobile customers (in '000) Scarlet Revenue (in mio ) For the full-year 2013, Tango, Belgacom s Luxembourgish mobile operator, continued to do well with reported revenues of EUR 127 million or an increase of 11.2% compared to This growth is driven by the good trend of smartphone sales with Tango s leading 4G subscriptions in Luxembourg and a growing customer base for quadruple play, including TV. Furthermore, over the year 2013, Tango added 9,000 customers. With Scarlet, Belgacom s multi-brand strategy in its home market started to pay off with the full-year revenue loss substantially declining versus previous years. In the last quarter of 2013, Scarlet s year-over-year evolution came to a turnaround point and progressed to a slight growth. 12 A EUR 26 million accounting adjustment was recorded in the second quarter 2012 following the passing of the new Telecom law 13 Belgacom does not apply a full cost allocation. Network and IT costs are therefore mainly centralized within SDE&W 9

82 Enterprise Business Unit - EBU Mobile disruption spill-over to business market impacting revenue and direct margin Solid growth in Mobile customer base Slow economy hampers ICT growth Regulatory price cuts significantly impacted revenue and segment result 2013 segment result totals EUR 1,023 million EBU revenues 2,501 2,421 Revenue before non-recurring items (in mio ) 2,349 2,294 2, Over the year 2013 Belgacom s professional customer segment generated EUR 2,198 million in revenue, i.e. 4.2% lower than for This decline was partly caused by regulatory 14 measures, lowering EBU s 2013 revenue by EUR 54 million or -2.3%. The remaining decline was primarily due to the disruption in the Belgian mobile market, with a substantial spill-over effect on the business market. The introduction of more abundant offers, including higher volumes of free minutes and SMSes, as well as higher data volumes, caused a significant pressure on the mobile revenue. This could not be fully compensated for by higher revenue from ICT, whose growth was hampered by a weak economy. EBU Revenue Evolution (in mio ) 2, ,198 FY 2012 Net Impact One-Offs Regulatory impact Fixed Voice Fixed Data ICT Mobile Service Revenue Terminals & Others FY Lower Mobile Termination Rates and the flow-through to Fixed-to-Mobile rates, lower Voice and Data Roaming rates 10

83 Fixed Voice revenue (in mio ) Fixed voice customers (in '000) Fixed voice ARPU (in ) ,491 1,441 1,385 1,356 1, * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units With enterprises rationalizing on their Fixed Voice lines, EBU s Fixed Voice business continued its declining trend in Over the full-year 2013, EUR 463 million was generated in Fixed Voice, or 3.8% less than for This is in part due to the lowered Fixed-to-Mobile rates, and in part to the continued erosion of Fixed Voice lines. In 2013 EBU s Fixed Voice line base eroded by 64,000 lines to a total of 1,292,000. The price changes in 2013 gave some support to the 2013 Fixed Voice ARPU 15 which slightly increased to EUR Fixed internet revenue (in mio ) Fixed internet customers (in '000) Fixed internet ARPU (in ) * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units For the full-year 2013, EBU reported EUR 380 million Fixed Data revenues, 2.1% less than for This includes revenue from Fixed Internet and data connectivity. The decline is in part due to a continued migration from older technologies to the Belgacom Explore platform, for which pricing is more favorable for customers. Furthermore, EBU ended the year 2013 with a slightly smaller customer base of 441,000 Internet customers (-0.5% year-on-year), partly offset by a 0.5% increase in ARPU to EUR 39.3, mainly driven by price adjustments. This offset the impact on ARPU from SOHO and SME customers increasingly opting for advantageous converged Packs. ICT revenue (in mio ) EBU reported EUR 701 million ICT revenue for This is EUR 9 million or 1.3% more than in 2012, in spite of an unfavorable economic climate, with customers delaying IT projects or opting for private Cloud-based solutions, triggering a shift from one-time revenue to monthly service fees Average revenue per user on a monthly basis 11

84 Mobile Service Revenue (in mio ) Mobile customers (in '000) Mobile blended ARPU (in ) ,235 1,303 1,408 1,486 1, * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units The Mobile service revenue, i.e. the combined revenue from Mobile Voice, Mobile Data and SMS, within the Enterprise Segment declined from EUR 626 million in 2012 to EUR 555 million in 2013 or -11.4%. Regulatory 16 price cuts significantly reduced the mobile revenue, with Mobile Data in particular being impacted by the capping of retail Data Roaming prices since July 2012, further reduced on 1 July In addition, EBU s Mobile Service revenue was impacted by a spill-over effect on business customers from the mobile re-pricing triggered by the new Telecom law. EBU s new Mobile pricing, supported by a recognized high-quality Mobile network, resulted in a rapid restoration of the port-in/port-out balance as of mid With an annualized Mobile churn rate of 11.9% for 2013, the churn fell even below the 12.7% mark of Mobile cards sold in a multi-play Pack did very well in 2013, and pushed the Mobile sales to a strong growth of 147,000 mobile cards, including Mobile Voice, Mobile Data and Machine-to-Machine cards. This brought the EBU Mobile customer base by end-2013 to 1,633,000 cards, up by 10% year-on-year. With mobile pricing under severe pressure, and an increasing number of Machine-to-Machine cards at low ARPU, the blended mobile ARPU amounted to EUR 29.9, down by 17.6% from the prior year. Most of the ARPU pressure, however, is caused by regulatory price cuts and the uptake of more abundant price plans, including more free Voice usage. EBU operating expenses Total expenses (in mio ) 1,269 1,209 1,164 1,181 1, Non-HR costs HR costs Cost of Sales Total The total operating expenses for the Enterprise Business Unit for 2013 totaled EUR 1,175 million, 0.5% lower compared with the previous year. This results from lower Cost of Sales and Other operating expenses, partly offset by higher HR costs. For 2013, EBU reported EUR 603 million in Cost of Sales, i.e. 2.6% less than for This results from the positive effect from lower Mobile Termination Rates, more than offsetting volume-driven commissions and SMS interconnection costs. Year-over-year the HR expenses increased by 3.9% to EUR 418 million in 2013, mainly due to a higher personnel base versus the previous year to support the increased servicing to Business customers and the migration from old to new technologies, along with the inflation-based salary indexation of January EBU segment result and contribution margin Segment result (in mio ) & margin 49.2% 50.0% 50.4% 48.5% 46.5% 1,231 1,212 1,185 1,113 1,023 EBU s segment result over the full-year 2013 totaled EUR 1,023 million, 8.1% lower compared to 2012 or 8.8% lower on a comparable 17 basis. This includes a EUR 37 million (-3.3%) negative impact from regulation. The remaining decrease was mainly driven by a lower Direct margin resulting from the pressure on Mobile Service and Fixed Voice revenue. The contribution margin 18 decreased to 46.5% in The final cut in Mobile Termination Rates (1 January 2013) and the reduced Voice and Data Roaming rates 17 Corrected for the EUR 8.1 million accounting adjustment in the second quarter 2012 following adoption of new Telecom law 18 Belgacom does not apply a full cost allocation. Network and IT costs are therefore mainly centralized within SDE&W 12

85 Service Delivery Engine & Wholesale SDE&W Revenue (in mio ) Total expenses (in mio ) Non-HR costs HR costs Cost of Sales SDE&W revenues Revenue within the SDE&W segment relates mainly to wholesale activities from Belgacom. Over the full-year 2013 the SDE&W revenues amounted to EUR 294 million, or 3.4% below those of This includes the negative effect from some regulatory 19 measures, lowering the SDE&W revenue by EUR 4 million (-1.2%) in The remaining decline is due to lower broadband volumes, partially compensated for by the commercial wholesale offer to Base and the growth in Roaming volumes which compensated for both regulated and commercial price reductions. SDE&W operating expenses Over the full-year 2013, the HR expenses totaled EUR 172 million, slightly down from the prior year. The salary indexation of January 2013 was more than compensated for by the effect from a lower headcount and more capitalized manpower resulting from increased network investments and IT development in The total non-hr expenses for the full-year 2013 totaled EUR 204 million. Besides the one-off provision reversal in the third quarter 2012, costs were up year-on-year because of the resources required for Belgacom s simplification projects. Staff & Support S&S Revenue (in mio ) Total expenses (in mio ) Non-HR costs HR costs S&S revenues The revenue from Staff & Support over the full-year 2013 totaled EUR 60 million, of which EUR 31 million was driven by capital gains recorded in the first and last quarter of These capital gains came from the sale of technical buildings as part of the network simplification project. S&S operating expenses The full-year 2013 non-hr expenses were down 7.7% from a high comparable base, driven by some unfavorable incidentals recorded in 2012 (impairment, provision for environmentally driven soil works) as well as the funding of the cost-efficiency project initiated in The HR expenses were up by 3% as a result of the inflation-based wage indexation in January 2013, partially offset by the lower headcount compared to end Regulatory impacts from Mobile Termination Rates and lowered Local Loop Unbundling and Bitstream prices 13

86 International Carrier Services BICS Revenue increase of 1.3% over 2012 Favorable destination mix to large extent offset by EU-wide MTR cuts & dollar effect Continued strong uptake of Mobile data 2013 gross margin up by 3.9% from 2012 ICS revenues 892 Revenue (in mio ) before non-recurring items 1,610 1,562 1,645 1,666 Over the full-year 2013 BICS reported EUR 1,666 million revenue, up by EUR 22 million or 1.3% compared to 2012, driven by BICS non-voice business. Revenue from the Voice business was fairly stable in relation to the previous year, as the benefit from a better destination mix was neutralized by the negative effect from European-wide MTR reductions and a disadvantageous dollar evolution ICS gross margin Gross margin (in mio ) The Gross margin over the full-year 2013 totaled EUR 254 million, a 3.9% year-on-year increase. While Voice revenues remained stable, the Voice gross margin improved by 8.2% driven by the high-margin traffic to Asia, while the MTR and dollar impacts are limited on gross margin. On the other hand, non-voice revenues were up by 12.9% whereas the Gross margin was down by 0.9% because of fierce price competition. ICS EBITDA and margin Segment result (in mio ) & margin 8.7% % 7.8% 7.8% 8.4% Driven by a higher Direct Margin and somewhat lower expenses, BICS reported over the full-year 2013 a segment result of EUR 140 million, up 8.6% from 2012, and a segment margin of 8.4% ICS Volumes ,316 Volumes (in mio ) 800 1,074 1,557 1,964 25,290 27,442 28,382 28,127 Non- Voice Voice Voice volumes were slightly down versus 2012 whereas nonvoice volumes continued to grow strongly in 2013, up by 26% from the prior year

87 QUARTERLY RESULTS AS REPORTED Group Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Restated Revenues (1) 1,588 1,611 1,620 1,644 6,462 1,586 1,583 1,568 1,582 6,318 Consumer Business Unit , ,226 Enterprise business unit , ,198 Service Delivery Engine & Wholesale Staff&Support International Carrier Services , ,666 Intersegment eliminations Costs of materials and charges to revenues , ,561 Personnel expenses and pensions , ,142 Other operating expenses EBITDA (1) , ,713 Segment EBITDA margin (1) 29.6% 27.2% 28.6% 26.1% 27.9% 27.8% 27.2% 27.3% 26.1% 27.1% Non recurring items Ebitda after non-recurring items , ,699 (1) before non-recurring items Group reported to underlying Q112 Q113 Var in % Q212 Q213 Var in % Q312 Q313 Var in % Q412 Q413 Var in % Var in % Restated Restated Restated Restated Restated GROUP - REVENUE Reported 1,588 1, % 1,611 1, % 1,620 1, % 1,644 1, % 6,462 6, % One-offs Like-for-like 1,588 1, % 1,623 1, % 1,620 1, % 1,644 1, % 6,474 6, % Regulation Underlying 1,588 1, % 1,623 1, % 1,620 1, % 1,644 1, % 6,474 6, % GROUP - EBITDA Reported % % % % 1,801 1, % One-offs Like-for-like % % % % 1,838 1, % Regulation Underlying % % % % 1,838 1, % One-offs: net impact provisions, the new Telco Law accounting adjustments in Q2'12, capital gains realised on the sale of a technical buildings, the Q3'13 (EBITDA-neutral) accounting reclassification and the loss on a disposal Regulation: includes impact from lower Mobile Termination and Roaming rates, and other regulatory impacts 15

88 Revenue evolution in percentages Q112 Q212 Q312 Q Q113 Q213 Q313 Q GROUP Reported YoY variance 0.3% -0.1% 1.5% 1.7% 0.9% -0.1% -1.7% -3.2% -3.8% -2.2% Like-for-like YoY variance 0.1% 0.8% 0.4% 0.7% 0.5% -0.8% -2.5% -3.1% -5.0% -2.9% Underlying YoY variance 1.0% 1.8% 2.7% 2.1% 1.9% 0.7% -0.6% -2.1% -4.1% -1.6% CBU EBU Reported YoY variance 2.1% -0.7% 2.8% 1.5% 1.4% -4.2% -1.5% -6.5% -4.2% -4.1% Like-for-like YoY variance 0.5% -0.8% 0.3% -1.0% -0.3% -4.2% -3.1% -5.9% -4.2% -4.4% Underlying YoY variance 1.7% 0.7% 2.8% 0.7% 1.5% -3.1% -1.8% -4.7% -3.2% -3.2% Reported YoY variance -2.2% -2.9% -2.2% -2.1% -2.3% -4.4% -3.8% -4.7% -3.8% -4.2% Like-for-like YoY variance -1.0% -0.3% -2.5% -2.4% -1.5% -4.4% -4.2% -4.7% -3.8% -4.3% Underlying YoY variance 0.1% 0.8% 1.3% -0.3% 0.4% -1.5% -0.7% -3.1% -2.4% -1.9% SDE&W Reported YoY variance -4.3% -4.9% -3.2% -5.0% -4.4% -3.0% -3.4% -2.4% -4.7% -3.4% Like-for-like YoY variance -5.1% -6.1% -4.5% -6.3% -5.5% -3.0% -3.4% -2.4% -4.7% -3.4% Underlying YoY variance -4.3% -4.9% -3.3% -5.0% -4.4% -1.8% -1.7% -1.9% -3.2% -2.1% BICS Reported YoY variance 2.6% 5.5% 5.7% 7.3% 5.3% 9.1% 0.9% 3.0% -6.8% 1.3% Like-for-like: i.e. excluding impact from M&A, the re-segmentation, the new Telco Law accounting adjustments, capital gains realised on the sale of a technical buildings, the Q3'13 accounting reclassification and litigation settlement Underlying: i.e. like-for-like excluding impact from regulatory measures Group Capex (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Group Capex Consumer Business Unit Enterprise business unit Service Delivery Engine & Wholesale Staff&Support International Carrier Services

89 CBU Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Restated Revenues , ,226 From Fixed , ,124 Voice Data TV Terminals (excl. TV) Scarlet From Mobile , ,019 Voice Data Terminals (excl. TV) Tango Other Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result Segment Contribution margin 43.7% 40.6% 44.7% 41.8% 42.7% 44.9% 42.8% 46.9% 40.0% 43.6% CBU Operationals Q112 Q212 Q312 Q Q113 Q213 Q313 Q FROM FIXED Number of access channels (thousands) 2,938 2,926 2,918 2,912 2,912 2,895 2,883 2,872 2,870 2,870 Voice 1,780 1,758 1,737 1,718 1,718 1,693 1,673 1,653 1,634 1,634 Broadband 1,159 1,169 1,181 1,193 1,193 1,203 1,210 1,219 1,235 1,235 Traffic (millions of minutes) 1,086 1, ,060 4,138 1, ,945 National , ,810 Fixed to Mobile International TV (thousands) 1,254 1,301 1,340 1,386 1,386 1,412 1,428 1,447 1,479 1,479 TV - households 1,057 1,093 1,125 1,156 1,156 1,170 1,184 1,198 1,218 1,218 of which multiple settop boxes ARPU (EUR) ARPU Voice ARPU broadband ARPU Belgacom TV FROM MOBILE Number of active customers (thousands) 3,805 3,811 3,748 3,643 3,643 3,561 3,572 3,560 3,568 3,568 Prepaid 2,116 2,071 1,992 1,923 1,923 1,815 1,733 1,684 1,640 1,640 Postpaid 1,690 1,739 1,756 1,720 1,720 1,746 1,838 1,876 1,928 1,928 Annualized churn rate (blended - variance in p.p.) 20.4% 19.9% 25.8% 36.0% 25.9% 33.3% 26.5% 26.1% 26.5% 28.0% Net ARPU (EUR) Prepaid Postpaid Blended Blended voice Blended data UoU (units) MoU (min) SMS (units)

90 EBU Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Restated Revenue , ,198 From Fixed , ,615 Voice Data Terminals ICT From Mobile Voice Data Terminals Other Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result , ,023 Segment Contribution margin 50.2% 48.3% 48.0% 47.6% 48.5% 47.0% 47.5% 45.9% 45.7% 46.5% Mobile Data - detail Adjusted* SMS Advanced data *The split between SMS and advanced Mobile Data has been adjusted due to a refinement in the allocation of data bundles. The 2012 results have been adjusted accordingly to keep a correct comparable basis. EBU- Operationals Q112 Q212 Q312 Q Q113 Q213 Q313 Q FROM FIXED Number of access channels (thousands) 1,841 1,824 1,815 1,799 1,799 1,781 1,760 1,746 1,732 1,732 Voice 1,394 1,379 1,370 1,356 1,356 1,338 1,318 1,305 1,292 1,292 Broadband Traffic (millions of minutes) , ,571 National , ,672 Fixed to Mobile International ARPU (EUR) ARPU Voice ARPU Broadband FROM MOBILE Number of active customers (thousands) 1,413 1,449 1,470 1,486 1,486 1,516 1,549 1,589 1,633 1,633 Postpaid 1,413 1,449 1,470 1,486 1,486 1,516 1,549 1,589 1,633 1,633 Annualized churn rate (blended - variance in p.p.) 11.7% 11.0% 10.8% 16.8% 12.7% 14.2% 13.6% 10.0% 10.4% 11.9% Net ARPU (EUR) Postpaid Postpaid voice Postpaid data UoU (units) MoU (min) SMS (units)

91 SDE&W Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Restated Revenues Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result SDE&W Operationals Q112 Q212 Q312 Q Q113 Q213 Q313 Q FROM FIXED Number of access channels (thousands) Voice (1) Broadband (1) FROM MOBILE Number of active Mobile customers (thousands) Retail (1) MVNO (1) i.e. Belgacom retail products sold via SDE&W (OLO's own usage and reselling) 19

92 S&S Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Restated Revenues Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result ICS Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Revenues , ,666 Costs of materials and charges to revenues , ,412 Personnel expenses and pensions Other operating expenses Segment result Segment EBITDA margin 7.3% 8.4% 8.3% 7.3% 7.8% 8.3% 8.9% 8.6% 7.7% 8.4% ICS Operationals Volumes (in million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Voice 6,907 6,984 6,934 7,556 28,382 7,267 6,701 7,287 6,872 28,127 Non-Voice (SMS/MMS) , ,964 20

93 RISK MANAGEMENT This section presents an overview of the Group s Risk Management including a description of its major risks and uncertainties and its main mitigation efforts. Taking risks is inherent in doing business and successfully managing risks delivers return to Belgacom s stakeholders. Belgacom believes that risk management is fundamental to corporate governance and the development of sustainable business. The Group has adopted a risk philosophy that is aimed at maximizing business success and shareholder value by effectively balancing risk and reward. The objective of risk management is not only to safeguard the Group s assets and financial strength but also to protect Belgacom s reputation. Financial risk management objectives and policies are reported in note 33 of the consolidated financial statements, published on the Belgacom website. Risks related to important ongoing claims and judicial procedures are reported in note 35 of these statements. The Enterprise and financial reporting risks are detailed below, together with the related mitigating factors and control measures. Note that this is not intended to be an exhaustive analysis of all potential risks Belgacom might be facing. 1. Enterprise risks The Group s Enterprise Risk Management (ERM) covers the spectrum of risks ( potential adverse events ) and uncertainties that Belgacom could encounter. Belgacom ERM is a structured and consistent framework for assessing, responding to and reporting on risks that could affect the achievement of Belgacom s strategic development objectives. It seeks to maximize value for shareholders by aligning risk management with the corporate strategy, assessing the emerging risk from regulation, new technologies or the market, and developing risk tolerance and mitigating strategies. Belgacom ERM has been reviewed and updated every year since This risk assessment and evaluation takes place as an integral part of Belgacom s annual strategic planning cycle. The resulting report on major risks and uncertainties is then reviewed by the management committee, the CEO and the Audit and Compliance Committee. Among the risks identified in the ERM exercise of 2013, the following risk categories were prioritized: 1- Human resources flexibility, 2- competitive market dynamics, 3- regulatory pressure, 4- dependence on equipment and technology. Principal risks Description Mitigation actions Human resources flexibility Competitive market dynamics Regulatory pressure Dependence on equipment and technology Through a burdened HR framework, strict HR rules and unionization of personnel, Belgacom might miss the much needed flexibility to significantly reduce its workforce costs in order to preserve the company s EBITDA. A new market entrant or radical price competition could further pressure Belgacom s market share and force Belgacom into revising its pricing downwards, negatively impacting revenue and profit. Competitive behavior could prevent Belgacom to monetize investments in new technologies. Belgacom s results could be materially negatively impacted by regulatory policy changes or actions from European or national regulatory entities. Belgacom still faces a much different regulatory playing field than cable operators in Belgium. Network systems could be impacted by damage, computer viruses, natural disasters and unauthorized access which could lead to loss of business and liability claims. Part of Belgacom s nation-wide fixed access network has been in place for a long time. Ageing copper cables could increase fault rates and decrease network performance. Belgacom s human resources department is in negotiations with unions to obtain more flexibility on the company s workforce. In the meantime, Belgacom has established a simplification program aiming for increased company agility and flexibility, a lower structural need for headcount, and an improved customer service. Belgacom applies a disciplined pricing strategy, being careful not to trigger further market value destruction. It employs a multi-brand strategy to address the price-sensitive segment separately. Belgacom has other levers than price thanks to its convergence strategy and investments in a superior mobile network, providing a competitive advantage. Belgacom communicates and negotiates with the Belgian and EU regulators to try to convince them (i) not to impose unfavorable terms and conditions and (ii) to put in place a fair and balanced regulatory framework. A multi-year cyber security plan is being implemented and a dedicated Cyber Defense Unit is being created. To address the ageing copper cables, Belgacom s fixed access renewal strategy is brought in line with the future target destination of its network. Legacy systems are being replaced by integrated systems. Service and license agreements with suppliers and vendors are strictly monitored. 21

94 1.1. Limited human resources flexibility With Belgacom s revenue under pressure for the past few years, the costs of the company need to be significantly reduced in order to preserve the EBITDA. A significant part of Belgacom s expenses is driven by the costs of the workforce, whether internal or outsourced, for which the company faces a global increase that is not sustainable for the future. Through a burdened HR framework, strict HR rules and unionization of personnel, Belgacom may lack the much needed flexibility. All this at a time when business complexity is increasing, creating a need for upgraded skills and up-staffing in customer-facing functions. Moreover, Belgium applies automatic inflation-based salary increases, leading to higher costs, not only of Belgacom s own employees but also of the outsourced workforce, with the outsourcing companies being subject to the indexation as well. On a Belgacom Group level, about one in three employees are statutory, benefitting from substantially higher protection against dismissal than that applicable to private sector employees. This may restrict Belgacom s ability to improve efficiency and increase flexibility to levels comparable to those of its competitors. To address the much needed structural measures, Belgacom s human resources department is in negotiations with the unions. The aim of these negotiations is to obtain more flexibility to move employees within the organization, adapt the workforce faster in line with the actual workload and align remuneration items with common market practices. Belgacom has established a comprehensive simplification program aiming for increased agility and flexibility, a lower structural need for headcount, and improved customer service. The simplification project will prepare the company for the coming wave of retiring employees (over the timeframe), minimizing the need for replacement by developing strategic workforce planning, fluent mobility and drastically simplifying and/or automating Belgacom s product and services, processes, systems and organization Competitive market dynamics Belgacom s business is mainly focused on Belgium, a small country with only a few large telecom players, among which Belgacom is the incumbent. Belgacom is operating in maturing, and, according to some, even saturating markets. In such circumstances, market value is vulnerable to disruptive behavior among competitors. Moreover, Belgacom s main competitors Mobistar, BASE and Telenet, are subsidiaries of France Telecom, KPN, and Liberty Global respectively, all large international operators. Regarding TV services, Belgacom plays a challenger role, facing strong cable competition. A new market entrant or radical price competition could cost Belgacom market share and negatively impact revenue and profit. For instance, Belgium s new Telecom Law, applicable since 1 October 2012 and indicated as one of the primary risks in the Risk Management chapter of the 2012 annual report, resulted in a significant increase in Mobile customer churn. This, combined with aggressive competitor mobile pricing (in both retail and wholesale), forced Belgacom to revise its mobile pricing offer at the end of 2012 and in April 2013, greatly increasing the value for customers for similar monthly price commitments. With churn levels normalizing in 2013 and mobile customer net additions back to positive, Belgacom applies a disciplined customer pricing strategy, being careful not to trigger further market value destruction. In case of market share loss due to a significant further reduction of competitor prices, however, Belgacom could be forced to revise its mobile pricing plans accordingly, which might result in additional pressure on mobile revenue. Nevertheless, as a result of its long-term strategy and continued network investments, Belgacom build itself an advantageous competitive position providing the company with other levers than just price. Belgacom offers mobile services on a superior mobile network, and its convergence strategy provides the company with a solid ground to compete, offering attractive multi-play solutions to its customers while reducing churn. Another differentiator for Belgacom is to take the lead in mobile innovation. In this regard, it was the first operator to launch 4G in Belgium, ending 2013 with 258 cities and municipalities covered, or 50% of Belgium s population. Belgacom intends to get a decent return on its investments by introducing speed-tiering of its mobile price plans. This translates in making the full speed capabilities of the 4G technology accessible only via its high-end mobile price packages. Subscribers to the mid- and low-end mobile offers and having a 4G-enabled device will also enjoy higher speeds, though will be capped at 20Mbps. The monetization of 4G, however, could become challenging should competitors decide to offer full 4Gcapabilities free of charge to all customers. Belgacom would then risk not being able to profit from the expensive investments made. In the fixed market, Belgacom faces strong competition from the cable operators. Potential consolidation among cable operators or between cable and mobile network operators could further strengthen competitors positions and open the cable network for new players. Substitution of fixed line services (e.g. by apps and social media like Skype, Facebook, etc.), TV content (such as Bhaalu, Stievie and Netflix in the future) could put further pressure on revenues and margins. Belgacom is responding to these threats through a convergent and bundled approach and by offering new services (e.g. TV Replay, Belgacom Cloud, Smart and Safe Living). 22

95 To preserve its Fixed and Mobile premium brands, Belgacom is applying a multi-brand strategy, addressing the pricesensitive segment via its subsidiary Scarlet. The latter offers attractively priced mobile and triple-play products. In the SME market, besides the competitors also active in the Consumer market, we also face competition from niche players in the different product markets. Belgacom remains a reference in this market through its convergent offers, mixing fixed and mobile, as well as telecom and IT. In the large-company market, Belgacom faces competition from internationally oriented operators like Orange Business Services, Colt, Verizon Business and BT Belgium and from integrators such as Dimension Data, Getronics, Cegeka and RealDolmen. The scattered competitive landscape drives price competition, and might further impact revenue and margins. In the international carrier services market, voice margins per minute have been under significant pressure over the past few years as a result of price competition, consolidation of competitors and the ease with which customers are able to change providers. If pressure on voice margins should continue and/or if the Group does not offset price decreases with increased volume, Belgacom s ICS growth rate, operating revenue and net profit could come under pressure. In addition, the pressure on the mobile data market might increase and therefore affect the growth profile of the International Carrier Services Regulatory pressure Belgacom operates in highly regulated markets, limiting the flexibility to manage its business. Belgacom s results could be materially negatively impacted by regulatory policy changes or actions from European or national regulatory entities. Among other things, the Group s revenue and profit could be affected by increased taxation, additional roaming regulation, additional consumer regulation and wholesale regulation. Current wholesale prices do not reflect the economic value of the underlying network assets. This could negatively affect the profitability of asset renewal (re-investments) and investments in next-generation networks. Belgacom still faces a much different regulatory playing field than its main competitors for fixed services, i.e. the regional cable operators. This provides them with a competitive advantage that distorts fair competition and that may negatively affect Belgacom s ability to compete for market share. Belgacom communicates and negotiates with the Belgian and EU regulators, either personally or through trade associations such as ETNO and GSMA, to try to convince these authorities (i) not to impose unfavorable terms and conditions and (ii) to put in place a fair and balanced regulatory framework promoting investments and establishing a level playing field with the cable operators. Belgacom also develops sound regulatory cost models to defend its pricing vis-à-vis the regulators. Ultimately, Belgacom challenges unfavorable and unfair decisions before the courts Dependence on equipment and technology Belgacom s business is highly dependent on technical infrastructure such as telecommunication equipment and IT platforms. Belgacom is able to deliver services only insofar as it can protect its network systems against damage from telecommunication failures, computer viruses, natural disasters and unauthorized access. Any system failure, incident, or security breach that causes interruptions to all or some of Belgacom s operations could impair its ability to provide services to its customers and could potentially have financial consequences and a reputation impact. To mitigate the risks related to incidents (e.g. fire) affecting technical buildings, Belgacom has spread its technology across different locations and buildings (e.g. 3 data centers, splitting corporate ICT services and customer ICT services), 10 network services nodes and hundreds of local exchanges. To ensure the security of its IT and telecom systems, a new multi-year cyber security plan is being implemented to allow more effective detection and remediation of cyber attacks. This new cyber security plan entails a wide range of actions consisting of: best-in-class security of IT platforms and networks for improved prevention; the creation of a Cyber Defense Unit exclusively devoted to detecting and solving cyber incidents; organizational measures and governance and the development of a more cyber-security-oriented culture and awareness towards the internal organization as well as towards partners, vendors and suppliers. Belgacom s service portfolio becomes increasingly dependent on numerous IT platforms. To preserve the quality of service delivered to its customers, Belgacom needs to guarantee stability, processing time and agility. Any disruption or security breach resulting in loss or damage to customers data or applications, or leading to inappropriate disclosure of confidential information, may lead to Belgacom incurring liability. In addition, the Group may incur additional costs to remedy the damage caused by these disruptions or security breaches. Belgacom possesses errors and omissions insurance, business interruption insurance and insurance specifically aimed to protect against certain losses resulting from, for instance, computer viruses and security breaches. For critical IT applications, an extensive resilience plan has been put in place in 2013 which allows complete segregation and substantially better disaster recovery capabilities in case of failures. Furthermore, to prevent problems in the supply chain, Belgacom monitors strictly its service and license agreements with suppliers and vendors. 23

96 Belgacom has a nation-wide fixed access network, part of which has been in place for a long time, the so-called legacy copper network. Ageing copper cables could increase fault rates and decrease performance, which could require additional copper replacement. To remedy this, Belgacom is bringing its renewal strategy in line with the target destination of its network. The mobile network might be subject to technical failures, affecting the quality of service or causing temporary service interruptions, leading to customer dissatisfaction. Elaborate network resilience programs have been put in place to further boost the ability to keep the network in operation in the event of failures. Belgacom continues to invest in stability improvements for both its fixed and mobile network by putting new technologies and architectures in place that enable higher redundancy (e.g. 4G, Vectoring, etc.). Belgacom also focuses on simplifying its legacy network through an elaborate network transformation program, although this could be subject to delayed implementation and consequently delayed savings from the out-phasing of technical buildings. Nonetheless, in the event of network or IT interruptions, Belgacom has multiple measures in place to remedy problems as quickly as possible. Firstly, Belgacom has an extensive monitoring center in place allowing very fast detection and identification of any problem that could jeopardize the proper functioning of operations. Secondly, Belgacom has elaborate, well-prepared procedures in place to deal with and remedy high-impact incidents as quickly as possible through Emergency Response Teams which operate 24/7 and include the best experts in their fields. 2. Financial reporting risks In the area of financial reporting, in addition to the general enterprise risks also impacting the financial reporting (e.g. personnel), the major risks identified include: new transactions and evolving accounting standards, changes in tax law and regulations, and the financial statement closing process New transactions and evolving accounting standards New transactions could have a significant impact on the financial statements, either directly in the financial statements or in the notes. An inappropriate accounting treatment could result in financial statements which do not provide a true and fair view any more. Changes in legislation (e.g. pension age, customer protection) could also significantly impact the financials. New accounting standards can require the gathering of new information and the adaption of complex (billing) systems. If not timely and adequately foreseen, the timeliness and reliability of the financial reporting could be put at risk. It is the responsibility of the Corporate Accounting department to follow the evolution in the area of evolving standards (both local GAAP and IFRS). Changes are identified, and the impact on the Belgacom financial reporting is proactively analysed. For every new type of transaction (e.g. new product, new employee benefit, business combination), an in depth analysis from a financial reporting, risk management, treasury and tax point of view is performed. In addition, the development requirements for the financial systems are timely defined and compliance with internal and external standards is systematically analysed. Emphasis is on the development of preventive controls and setting up reporting tools that enable posteriori controls. On a regular base, the Audit and Compliance Committee (A&CC) and the Management Committee are informed about new upcoming financial reporting standards and their potential impact on the Belgacom Group financials Changes in tax law and regulations Changes in tax laws and regulations (corporate income tax, VAT...) or in their application by the tax authorities could significantly impact the financial statements. To ensure compliance, it is often required to set up, in a short timeframe, additional administrative processes to collect relevant information or to implement updates to existing IT systems (e.g. billing systems). The tax department continuously follows potential changes in tax law and regulations as well as interpretations of existing tax laws by the tax authorities. Based on laws, doctrine, case law and political statements as well as draft laws available etc., an impact analysis is made from a financial perspective from an operational point of view. 24

97 2.3. Financial statement closing process The delivery of timely and reliable financial statements remains dependent on an adequate financial statement closing process. Clear roles and responsibilities in the closing process of the group financial statements have been defined. During the monthly, quarterly, half-yearly and annual financial statement closing processes, there is a continuous monitoring on the different steps. In addition, different controls are performed to ensure quality and compliance with internal and external requirements and guidelines. For Belgacom and its major affiliates, a very detailed closing calendar is established, which includes in detail crossdivisional preparatory meetings, deadlines for ending of specific processes, exact dates and hours when IT sub-systems are locked, validation meetings and reporting deliverables. For every process and sub-process, different controls are performed, including preventive controls, where information is tested before being processed, as well as detective controls, where the outcome of the processing is being analysed and confirmed. Specific attention is given to reasonableness tests, where financial information is being analysed against more underlying operational drivers, and coherence tests, where financial information from different areas is brought together to confirm results or trends, etc Tests on individual accounting entries are performed for material or non-recurrent transactions and on a sample basis for others. The combination of all these tests provides sufficient assurance on the reliability of the financials. INTERNAL CONTROL SYSTEM The Belgacom Board of Directors is responsible for the assessment of the effectiveness of the systems for internal control and risk management. Belgacom has set up an internal control system based on the COSO model of 1992, i.e. the integrated internal control and enterprise risk management framework published by the Committee of Sponsoring Organisation of the Treadway Commission ( COSO ) in This COSO methodology is based on five areas: the control environment, risk analysis, control activities, information & communication and monitoring. Belgacom s internal control system is characterized by an organization with a clear definition of responsibilities, next to sufficient resources and expertise, and also appropriate information systems, procedures and practices. Obviously, Belgacom cannot guarantee that this internal control will be sufficient in all circumstances as risks of misuse of assets or misstatements can never be totally eliminated. However, Belgacom organizes a continuous review and follow-up of all the components of its internal controls and risk management systems to ensure they remain adequate. Belgacom considers the timely delivery to all its internal and external stakeholders of complete, reliable and relevant financial information in conformity with International Financial Reporting Standards (IFRS) and with other additional Belgian disclosure requirements as an essential element of management and governance. Therefore, Belgacom has organized its internal control and risk management systems over its financial reporting in order to ensure this objective is met. 1. Control environment 1.1. Organization of internal control In accordance with the bylaws, Belgacom has an Audit and Compliance Committee (A&CC), which consists of five nonexecutive Directors, the majority of whom must be independent. In line with its charter, it is chaired by an independent Director. The members of the A&CC have sufficient expertise in financial matters to discharge their functions. Its Chairman, Mr. Pierre-Alain De Smedt, is competent in accounting and auditing. He is a licentiate in commercial and financial sciences. He occupied during his career several functions as CFO, CEO and COO. Amongst his non-executive functions he is also member of the Audit Committee of Avis Europe. The A&CC s role is to assist and advise the Board of Directors in its oversight on (i) the financial reporting process, (ii) the efficiency of the systems for internal control and risk management of Belgacom, (iii) the Belgacom s internal audit function and its efficiency, (iv) the quality, integrity and legal control of the statutory and the consolidated financial statements of Belgacom, including the follow up of questions and recommendations made by the auditors, (v) the relationship with the Group s auditors and the assessment and monitoring of the independence of the auditors, (vi) Belgacom s compliance with legal and regulatory requirements, (vii) the compliance within the organization with the Belgacom s Code of Conduct and the Dealing Code. The A&CC meets at least once every quarter. 25

98 1.2. Ethics The Board of Directors has approved a Corporate Governance Charter and a Code of Conduct The way we do responsible business. All employees must perform their daily activities and their business objectives according to the strictest ethical standards and principles, using the Group values (Respect, Can do and Passion) as guiding principle. The Code The way we do responsible business, which is available on sets out the abovementioned principles, and aims to inspire each employee in his or her daily behaviour and attitudes. The ethical behaviour is not limited to the text of the Code. The Code is a summary of the main principles and is thus not exhaustive. In addition, Belgacom in general and the Finance department in particular have a tradition of a high importance to compliance and a strict adherence to a timely and qualitatively reporting Policies and procedures The principles and the rules in the Code The way we do responsible business are further elaborated in the different internal policies and procedures. These Group policies and procedures are available on the Belgacom intranet-sites. Every policy has an owner, who regularly reviews and updates if necessary. Periodically, and at moment of an update, an appropriate communication is organized. In the financial reporting domain, general and more detailed accounting principles, guidelines and instructions are summarized in the accounting manuals and other reference material available on the Belgacom intranet-sites. In addition, the Corporate Accounting department regularly organizes internal accounting seminars to update finance and nonfinance staff on accounting policies and procedures Roles & responsibilities Belgacom s internal control system benefits from the fact that throughout the whole organization, roles and responsibilities are clearly defined. Every business unit, division and department has its vision, mission and responsibilities, while on individual level everybody has a clear job description and objectives. The main role of the Finance Division is to support the divisions and affiliates by providing accurate, reliable and timely financial information for decision making, to monitor the business profitability and to manage effectively corporate financial services. The establishment of the external financial reporting falls under the responsibility of the Corporate Accounting department. The team of the Corporate Accounting department assumes this accounting responsibility for the mother company Belgacom and the major Belgian companies. They also provide the support to the other affiliates. For this centralized support, the organization is structured according to the major (financial) processes. These major processes include capital expenditures and assets, inventories, contracts in progress & revenue recognition, financial accounting, operational expenditures, provisions & litigations, payroll, post-employment benefits and taxes. This centralized support organized around specific processes and IFRS standards allows for in depth accounting expertise and ensures compliance with group guidelines. The consolidation of all different legal entities into the Consolidated Financial Statements of the Belgacom Group is realized centrally. The Consolidation department defines and distributes information relating to the implementation of accounting standards, procedures, principles and rules. It also monitors changes in regulations to ensure that the financial statements continue to be prepared in accordance with IFRS, as adopted by the European Union. The monthly instructions for consolidation set forth not only the schedules for preparing accounting information for reporting purposes, but also includes detailed deadlines and items requiring particular attention, such as complex issues or new internal guidelines Skills & expertise Adequate staffing is a matter to which Belgacom pays careful attention. This requires not only sufficient headcount, but also the adequate skills and expertise. These requirements are taken into account in the hiring process, and subsequently in the coaching and formation activities, facilitated and organized by the Belgacom Corporate University. For financial reporting purposes, a specific formation cycle was put in place, whereby junior as well as senior staff have to participate mandatory. These internally and externally organized accounting seminars cover not only IFRS but local accounting rules & regulations, Tax and Company law & regulations as well. In addition, the knowledge and expertise is also kept up to date and extended for more specific domains for which staff is responsible (revenue assurance, pension administration, financial products, etc.) through attendance to seminars and self-study. Furthermore, employees also attend general formations session on Belgacom new business products & services. 26

99 2. Risk analysis Major risks and uncertainties are reported in the caption Risk Management. 3. Risk mitigating factors and control measures Mitigating factors and control measures are reported in the caption Risk Management. 4. Information and communication 4.1. Financial reporting IT systems The accounting records of Belgacom and most of its affiliates are kept on large integrated IT systems. Operational processes are often integrated in the same system (e.g. supply chain management, payroll). For the billing systems, which are not integrated, adequate interfaces and a monitoring system have been developed. For the consolidation purposes, a specific consolidation tool is used. The organizational set-up and access management are designed to support an adequate segregation of duties, prevent unauthorized access to the sensitive information and prevent unauthorized changes. The set-up of the system is regularly subject to the review by the internal audit department or external auditors Effective Internal communication Most of the accounting records today are kept under IFRS as well as local GAAP. In general, financial information delivered to management and used for budgeting, forecasting and controlling activities is established under IFRS. A common financial language used throughout the organization positively contributes to an effective and efficient communication Reporting and validation of the financial results The financial results are internally reported and validated on different levels. On the level of processes, there are validation meetings with the business process owners. On the level of the major affiliates, a validation meeting is organized with the accounting and controlling responsible. On Belgacom group level, the consolidated results are split per segments. For every segment, the analysis and validation usually includes comparison with historical figures, as well as budget-actual and forecast-actual analysis. Validation requires (absences of) variances to be analyzed and satisfactorily explained. Afterwards, the financial information is reported and explained to the Belgacom Management Committee (monthly) and presented to the A&CC (quarterly). 5. Supervision and assessment of internal control The effectiveness and efficiency of the internal control are regularly assessed in different ways and by different parties: Each owner is responsible for reviewing and improving its business activities on a regular basis: this includes a.o. the process documentation, reporting on indicators and monitoring of those. In order to have an objective review and evaluation of the activities of each organization department, Belgacom s Internal Audit department conducts regular audits across the Group s operations. The independence of Internal Audit is ensured via its direct reporting line to the Chairman of the A&CC. Audit assignments performed may have a specific financial processes scope but will also assess the effectiveness and efficiency of the operations and the compliance towards the applicable laws or rules. The A&CC reviews the quarterly interim reporting and the specific accounting methods. The main disputes and risks facing the Group are considered; the recommendations of internal audit are followed-up; the compliance within the Group with the Code of Conduct and Dealing Code is regularly discussed. Except for some very small foreign affiliates, all legal entities of the Belgacom Group are subject to an external audit. In general, this audit includes an assessment of the internal control, and leads to an opinion on the statutory financials and on the (half-yearly and annual) financials reported to Belgacom for consolidation. In case the external audit reveals a weakness or identifies opportunities to further improve the internal control, recommendations are made to management. These recommendations, the related action plan and implementation status are at least annually reported to the A&CC. 27

100 OTHER INFORMATION Rights, commitments and contingencies as of 31 December 2013 Disclosures related to rights, commitments and contingencies are reported in note 35 of the consolidated financial statements. Use of financial instruments Disclosures related to the use of financial instruments are reported in note 33 of the consolidated financial statements. Circumstances which may considerably impact the development of the Group Circumstances which may considerably impact the development of the Group are reported in the sections Risk Management and Internal Control of this management report. Research and development activities In general, the research and development activities cover 4 key steps in the adoption cycle of a technology or of a service based on technology: Study of the technology s potential: determination of the technological and commercial opportunities and its positioning in the technology portfolio; Introduction of the technology: as the technology is selected, an engineered solution is necessary for deployment, exploitation and day-to-day management; Evolution of the technology: once deployed, the technology will continue to evolve in accordance with its potential and market demand; The preparation of the introduction of new services. In 2013, the research and development activities covered the following: Study of the potential of new technologies: o o o o o o o o o Further detailed studies on solutions to phase out traditional technologies and to migrate to a fully IP based network. More specifically the solutions for replacing PSTN and ISDN (Access Gateway, ISDN Access Devices and alternatives) were further investigated on their technical, economical and operational feasibility. Study to define future target transport network architectures and supporting technologies, aiming to cope with disruptive traffic growth, higher resiliency, as well as backbone network simplification. Further studies for the introduction of IPv6 in the data networks. Fibre to the Home (FTTH): technical-economic studies have been further conducted and preparations continued to deploy FTTH in green-field zonings. A first pilot for fibre-based connections in a new zoning was realized in the town of Brecht. A study has been started to investigate the potential of deploying fibre closer to the homes, by re-using the last meters of the existing copper pair for connecting the home (solution based on G.Fast standards). Investigation on viable solutions to optimize the data traffic handling on fixed and mobile networks, in order to ensure the optimal Quality of Service. Belgacom started to investigate the capabilities of the newest video coding solutions (HEVC / H265 video coding). Belgacom started also to investigate the potential of the integration of WiFi technology with the mobile data network to always deliver best data experience. Belgacom has a continuous focus on the Green aspect. With green ICT and ICT for green, Belgacom actively participates in reducing our own environmental impact, as well as the impact of others. Several areas are being investigated (e-prescription, smart grids...). Introduction of new technologies: o o Belgacom introduced in its mobile network the latest evolution in the 3G technology (HSPA+ or 3G+ ) which doubles the average download speed and increases significantly the upload speed for devices supporting this evolution. Belgacom and Alcatel-Lucent have been further developing in a partnership a next step in VDSL2 technology ( Vectoring ). This solution allows for cancelling out interference in a copper cable and will allow increasing substantially the data speed that can be offered. A new modem ( Bbox3 ) that supports this Vectoring solution has been developed and introduced. 28

101 Evolution of the technology in terms of improvement and existing services extension: o o o o Belgacom further improved and extended its portfolio on Cloud-based Services with a residential cloud solution (storage and sharing). Belgacom extended its internet-of-things services with the introduction of Home Control/View (multidevice view, alert and interaction with home devices). Belgacom TV services have been further enriched. A new decoder has been developed and a faster application for TV Everywhere has been made available. TV Replay, a totally new service, has been introduced, allowing customers to watch TV programs at the moment which is most convenient for them. The download speed on VDSL2 has been further increased (up to 50 Mbps) by further improving DLM ( Dynamic Line Management ), a technology which was developed in-house. The preparation of the introduction of new services: o Belgacom was one of the main participants in the fiber-based pilot network in Kortrijk, in which test users are provided with high-speed access. This Living Lab enables application developers to test new applications and services in a real-life environment with a representative number of test users. Belgacom has also been testing some advanced services. Belgacom collaborates with universities, industrial partners and several other bodies, such as iminds (independent research institute founded by the Flemish government), and I.W.T. (Agentschap voor Innovatie door Wetenschap en Technologie). In this way, Belgacom has been participating to several R&D programs in various domains. Belgacom takes also part in several User Committees for Strategic Research projects. Treasury shares Disclosures related to treasury shares are reported in note 17 of the consolidated financial statements. Capital management The purpose of the Group s capital management is to maintain net financial debt and equity ratios that allow for security of liquidity at all times via flexible access to capital markets, in order to be able to finance strategic projects and to offer an attractive remuneration to shareholders. The latter was last updated by the Belgacom Board of Directors on 25 February Since then Belgacom has committed to return, in principle, most of its annual consolidated cash flow before financing activities (or Free Cash Flow ), to its shareholders. However, the return of such free cash flow either through dividends or share buybacks, is being reviewed on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective merger and acquisition projects, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves. Over the two periods presented, the Group didn t issue new shares or any other dilutive instrument. Post-balance sheet events Disclosures related to post-balance sheet events are reported in note 40 of the consolidated financial statements. On behalf of the Board of Directors, Brussels, February 27, 2014 Leroy Dominique President & CEO De Clerck Stefaan Chairman of the Board of Directors 29

102 CONSOLIDATED FINANCIAL STATEMENTS Prepared under International Financial Reporting Standards for each of the two years ended 31 December 2013 and 2012 Consolidated balance sheet Consolidated income statement Consolidated statement of other comprehensive income Consolidated statement of cash flows Consolidated statement of changes in equity Notes to the consolidated financial statements Note 1. Corporate information Note 2. Significant accounting policies Note 3. Goodwill Note 4. Intangible assets with finite useful life Note 5. Property, plant and equipment Note 6. Investments in subsidiaries, joint ventures and associates Note 7. Other participating interests Note 8. Income taxes Note 9. Assets and liabilities for pensions, other post-employment benefits and termination benefits Note 10. Other non-current assets Note 11. Inventories Note 12. Trade receivables Note 13. Other current assets Note 14. Investments Note 15. Cash and cash equivalents Note 16. Assets classified as held for sale Note 17. Equity Note 18. Interest-bearing liabilities Note 19. Provisions Note 20. Other non-current payables Note 21. Other current payables Note 22. Net revenue Note 23. Other operating income Note 24. Non-recurring income Note 25. Costs of materials and services related to revenue Note 26. Personnel expenses and pensions Note 27. Other operating expenses Note 28. Non-recurring expenses Note 29. Depreciation and amortization Note 30. Net finance income / (costs) Note 31. Earnings per share Note 32. Dividends paid and proposed Note 33. Additional disclosures on financial instruments Note 35. Rights, commitments and contingent liabilities Note 36. Share-based Payment Note 37. Relationship with the auditors Note 38. Segment reporting Note 39. Recent IFRS pronouncements Note 40. Post balance sheet events Auditor s report

103 CONSOLIDATED BALANCE SHEET As o f 31 D ecemb er (EUR millio n ) No te 01/01/ res ta ted res ta ted ASSETS NON-CURRENT ASSETS 6,238 6,192 6,254 Goodwill 3 2,323 2,339 2,320 Intangible assets with finite useful life 4 1,155 1,097 1,185 Property, plant and equipment 5 2,401 2,467 2,558 Investments in associates Other participating interests Deferred income tax assets Other non-current assets CURRENT ASSETS 2,095 2,051 2,163 Inventories Trade receivables 12 1,328 1,341 1,289 Current tax assets Other current assets Investments Cash and cash equivalents Assets classified as held for sale TOTAL ASSETS 8,332 8,243 8,417 LIAB ILITIES AND EQUITY EQUITY 17 3,227 3,09 3 3,042 Sha reho lders ' equity 17 3,003 2,881 2,846 Issued capital 1,000 1,000 1,000 Treasury shares Restricted reserve Remeasurement reserve Stock compensation Retained earnings 2,458 2,377 2,310 Foreign currency translation No n -Co ntro lling interes ts NON-CURRENT LIAB ILITIES 2,845 2,678 2,865 Interest-bearing liabilities 18 1,931 1,761 1,950 Liability for pensions, other post-employment benefits and termination benefits Provisions Deferred income tax liabilities Other non-current payables CURRENT LIAB ILITIES 2,260 2,472 2,511 Interest-bearing liabilities Trade payables 1,343 1,310 1,320 Tax payables Other current payables Liabilities associated with assets classified as held for sale TOTAL LIAB ILITIES AND EQUITY 8,332 8,243 8,417 32

104 CONSOLIDATED INCOME STATEMENT Yea r en d ed 31 D ecemb er (EUR millio n ) No te res ta ted Net revenue 22 6,415 6,239 Other operating income To ta l inco me 6,462 6,318 Costs of materials and services related to revenue 25-2,611-2,561 Personnel expenses and pensions 26-1,126-1,142 Other operating expenses Non-recurring expenses To ta l o p era ti n g exp en s es b efo re d ep reci a ti o n a n d a mo rti za ti o n -4,6 76-4,6 19 Op era ti n g i n co me b efo re d ep reci a ti o n a n d a mo rti za ti o n 1,786 1,6 9 9 Depreciation and amortization Opera ting inco me 1, Finance income Finance costs Net finance costs In co me b efo re ta xes Tax expense Net inco me Non-controlling interests Net income (group share) Basic earnings per share (in EUR) EUR 1.98 EUR Diluted earnings per share (in EUR) EUR 1.98 EUR Weighted average nb of outstanding ordinary shares ,011, ,759,360 Weighted average nb of outstanding ordinary shares for diluted earnings per share ,688, ,987,711 33

105 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME Yea r en d ed 31 D ecemb er (EUR millio n ) res ta ted Net inco me Other co mp rehen s i ve i n co me: Items tha t ma y b e recla s s i fi ed to p ro fi t a n d lo s s Cash flow hedges Gain/(loss) taken to equity 1-5 Transfer to profit or loss for the period 0 1 Exchange differences on translation of foreign operations -1-1 To ta l b efo re rela ted ta x effects -1-5 Rela ted ta x effects Cash flow hedges: Gain/(loss) taken to equity 0 2 In co me ta x rela ti n g to i tems tha t ma y b e recla s s i fi ed 0 1 Items tha t ma y b e recla s s i fi ed to p ro fi t a n d lo s s - n et o f rela ted ta x effects -1-3 Items tha t wi ll n o t b e recla s s i fi ed to p ro fi t a n d lo s s Remeasurement of defined benefit obligations To ta l b efo re rela ted ta x effects Rela ted ta x effects Remeasurement of defined benefit obligations 11-6 In co me ta x rela ti n g to i tems tha t wi ll n o t b e recla s s i fi ed 11-6 Items tha t wi ll n o t b e recla s s i fi ed to p ro fi t a n d lo s s - n et o f rela ted ta x effects To ta l co mp rehen s i ve i n co me Attributable to: Equity holders of the parent Non-controlling interests

106 CONSOLIDATED STATEMENT OF CASH FLOWS Yea r en d ed 31 D ecemb er (EUR millio n ) No te res ta ted Ca s h flo w fro m o p era ti n g a cti vi ti es Net income (group share) Adjustments for: Non-controlling interests Depreciation and amortization on intangible assets and property, plant and equipment 4& Increase of impairment on goodwill, intangible assets and property, plant and equipment 3/4/ Increase of provisions 40 1 Deferred tax expense Increase of impairment on participating interests 27 1 Fair value adjustments on financial instruments Loans amortization 5 4 Gain on disposal of associates Gain on disposal of property, plant and equipment Other non-cash movements 9 5 Op era ti n g ca s h flo w b efo re wo rki n g ca p i ta l cha n g es 1,5 47 1,447 Increase in inventories Decrease / (increase) in trade receivables Decrease in current income tax assets 2 2 Decrease / (increase) in other current assets 11-9 Increase / (decrease) in trade payables Increase / (decrease) in income tax payables Increase in other current payables Decrease in net liability for pensions, other post-employment benefits and termination benefits Decrease in other non-current payables and provisions In crea s e i n wo rki n g ca p i ta l, n et o f a cq u i s i ti o n s a n d d i s p o s a ls o f s u b s i d i a ri es Net ca s h flo w p ro vi d ed b y o p era ti n g a cti vi ti es (1) 1,48 0 1,319 Ca s h flo w fro m i n ves ti n g a cti vi ti es Cash paid for acquisitions of intangible assets and property, plant and equipment 4& Cash paid for acquisitions of other participating interests and joint ventures -4-6 Cash paid for acquisition of consolidated companies, net of cash acquired Cash received from sales of intangible assets and property, plant and equipment 7 38 Net cash received from other non-current assets 3 5 Net ca s h u s ed i n i n ves ti n g a cti vi ti es Ca s h flo w b efo re fi n a n ci n g a cti vi ti es Ca s h flo w fro m fi n a n ci n g a cti vi ti es Dividends paid to shareholders Dividends paid to non-controlling interests Net sale of treasury shares Net (purchase) / sale of investments Variation in equity -3-6 Repayment of vendor financing 0-7 Issuance of long term debt Repayment of long term debt Issuance of short term debt Net ca s h u s ed i n fi n a n ci n g a cti vi ti es Net i n crea s e / (d ecrea s e) o f ca s h a n d ca s h eq u i va len ts Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December (1) Net cash flow from operating activities includes the following cash movements : Interest paid Interest received 3 2 Income taxes paid

107 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR mi lli o n ) Is s u ed ca p i ta l Trea s u ry s ha res (TS) Res - tri cted res erve Remea - s u remen t res erve Fo rei g n cu rren cy tra n s - la ti o n Sto ck Co mp en - s a ti o n Reta i n ed Ea rn i n g s Sha reho l- d ers ' Eq u i ty No n - co n tro l- li n g i n teres ts (NCI) To ta l Eq u i ty Balance at 1 January , ,532 3, ,303 Remeasurement defined benefit obligations Balance at 1 January 2012 (restated ) ,227 Remeasurement defined benefit obligations Other comprehensive income Net income Total comprehensive income Dividends to shareholders (relating to 2011) Interim dividends to shareholders (relating to 2012) Dividends of subsidiaries to non-controlling interests Treasury shares (TS) Exercise of stock options Sale of TS under a discounted share purchase plan Stock options Stock options granted and accepted Deferred stock compensation Amortization deferred stock compensation Exercise of stock options Total transactions with equity holders Balance at 31 December 2012 (restated ) 1, ,377 2, ,093 Cash flow hedges - gain/(loss) taken to equity Currency translation differences Remeasurement defined benefit obligations Other comprehensive income Net income Total comprehensive income Dividends to shareholders (relating to 2012) Interim dividends to shareholders (relating to 2013) Dividends of subsidiaries to non-controlling interests Treasury shares (TS) Exercise of stock options Sale of TS under a discounted share purchase plan Stock options Amortization deferred stock compensation Exercise of stock options Total transactions with equity holders Balance at 31 December , ,310 2, ,042 36

108 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1. Corporate information The consolidated financial statements at 31 December 2013 were authorized for issue by the Board of Directors on February 27, They comprise the financial statements of Belgacom SA, its subsidiaries and joint ventures (hereafter the Group ) as well as the Group s interest in associates accounted for under the equity method. Belgacom SA is a Limited Liability Company of Public Law registered in Belgium. The transformation of Belgacom SA from Autonomous State Company into a Limited Liability Company of Public Law was implemented by the Royal Decree of 16 December Belgacom SA headquarters are located at Boulevard du Roi Albert II, Brussels, Belgium. As from 1 January 2008 onwards, the Board of Directors, the Chief Executive Officer and the Belgacom Management Committee manage the operations of the Belgacom Group based on the customer-oriented organization structured around the five following reportable operating segments: The Consumer Business Unit (CBU) sells voice products and services, internet and television, both on fixed and mobile networks, to residential customers, mainly on the Belgian market; The Enterprise Business Unit (EBU) sells ICT services and products to professional customers, whether they are self-employed persons, small companies or major corporations. These ICT solutions, including telephone services, are marketed mainly under the Belgacom, Proximus and Telindus brands, on both the Belgian and international markets; The Service Delivery Engine & Wholesale (SDE&W) centralizes all the network and IT services and costs (excluding costs related to customer operations and to the service delivery of ICT solutions), provides services to CBU and EBU and sells these services to other telecom and cable operators; International Carrier Services (ICS) is responsible for international carrier activities; Staff and Support (S&S) brings together all the horizontal functions (human resources, finance, legal, strategy and corporate communication), internal services and real estate that support the Group s activities. Further information concerning the operating segments is included under note 38. The number of employees of the Group (in full time equivalents) amounted to 15,699 at 31 December 2013 and 15,859 at 31 December For the year 2013, the average number of headcount of the Group was 149 management personnel, 14,047 employees and 1,557 workers. For the year 2012, the average number of headcount of the Group was 151 management personnel, 14,176 employees and 1,625 workers. Note 2. Significant accounting policies Basis of preparation The accompanying consolidated financial statements as of 31 December 2013 and for the year then ended have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as adopted for use in the European Union. The Group did not early adopt any IASB standards or interpretations. The consolidated financial statements have been prepared on a historical cost basis, except for the measurement at fair value of derivatives and available-for-sale financial assets. The carrying values of assets and liabilities that are hedged with fair value hedges are adjusted to record the change in the fair value attributable to the risks that are being hedged. Changes in accounting policies The Group doesn t anticipate the application of standards and interpretations. The accounting policies applied are consistent with those of the previous financial years except that the Group applied the new or revised IFRS standards and interpretations as adopted by the European Union that became mandatory on 1 January 2013 and that are detailed as follows: Improvements to IFRS s ( ); Amendments to standards: o o o Amendments to IAS 1 - Presentation of Items of Other Comprehensive Income (Clarification of the requirement for comparative information); Amendments to IFRS 7 - Financial Instruments: Disclosures (Offsetting Financial Assets and Financial Liabilities); Amendments to IAS 12 - Income Taxes (Deferred Tax: Recovery of Underlying Assets). Newly issued standards: o IFRS 13 ( Fair Value Measurement ). 37

109 Revised standards: o IAS 19 ( Employee Benefits ): The revision mainly relates on post-employment benefits (see notes 9.2 and 9.3). The major changes relate to the recognition of actuarial gains and losses through Other Comprehensive Income (equity) and the alignment of the expected return of assets to the discount rate. When applying the revision, Belgacom decided to classify the net periodic pension cost in operating and financing activities for their respective components. The adoption of IAS 19 Revised in 2013 requires a retrospective application, meaning that the year 2012 (including the opening balance sheet of 2012) is restated. The adoption of these new standards and interpretations has limited impacts on the financial statements of the Group, except for the adoption of IAS 19 Revised on Employee Benefits with impacts as detailed here below: (EUR mi lli o n ) As o f 1 Ja n u a ry 2012 a s p revi o u s ly IAS 19 a djus tments As a t 1 Ja n u a ry 2012 res ta ted Pensions and similar obligations Pension asset Deferred income taxes (net) Effect o n eq u i ty - d ecrea s e -75 Shareholders'equity 3, ,003 Non Controlling Interests (EUR mi lli o n ) As a t 31 D ecemb er 2012 a s p revi o u s ly repo rted IAS 19 a djus tments As a t 31 D ecemb er 2012 (a s res ta ted ) Pensions and similar obligations Pension asset Deferred income taxes (net) Effect o n eq u i ty - d ecrea s e -135 Shareholders'equity 3, ,881 Non Controlling Interests The accumulated impact on assets, liabilities and equity as per 31 December 2013 from the application of amendment to IAS 19 as revised 2011 is summarized below: (EUR mi lli o n) IAS 19 a d jus ted Increase in pensions and similar obligations 152 Deferred income taxes liablitites -29 Effect o n eq ui ty - d ecrea s e -123 Shareholders'equity -123 Non controlling interests 0 (EUR millio n ) 2012 res ta ted 2013 Imp a ct o n o ther co mp rehen s i ve i n co me fo r the yea r o f the a p p li ca ti o n o f IAS 19 (a s revi s ed 2011) Increasse/ (decrease) in remeasurement of defined benefit obligation and actuarial gains(losses) recognized Increase / (decrease) deferred income taxes (In crea s e) / d ecrea s e eq u i ty Shareholders'equity Non Controlling Interests 0 0 Imp a ct o n i n co me s ta temen t Operating income before depreciation, amortization and non recurring Non recurring expense 3 0 Net finance cost Imp a ct o n p ro fi t b efo re ta x o f the yea r 1 5 (Increase)/ decrease in deferred income taxes 0-1 Imp a ct o n n et i n co me o f the yea r 1 4 Group share 1 4 Non Controlling Interests 0 0 Basis of consolidation Note 6 lists the Group s subsidiaries, joint ventures and associates. Subsidiaries are those entities controlled by the Group. Control exists when Belgacom has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The investments in subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Intercompany balances and transactions, and resulting unrealized profits or losses between Group companies are eliminated in consolidation. When necessary, accounting policies of subsidiaries are adjusted to ensure that the consolidated financial statements are prepared using uniform accounting policies. Companies that are jointly controlled (defined as those entities in which the Group has joint control through a contractual arrangement requiring unanimous consent of the parties sharing control) are included using the equity method, from the date on which joint control is established and until the date on which the Group ceases to have joint control over the joint venture. 38

110 Associated companies in which the Group has a significant influence, defined as an investee in which Belgacom has the power to participate in its financial and operating policy decisions (but not to control the investee), are also accounted for using the equity method. Under that method, the investments held in associates are initially recorded at cost and the carrying amount is subsequently adjusted to recognize the Group s share in the profit or losses of the associate as from the date of acquisition. These investments and the equity share of results for the period are shown in the balance sheet and income statement as investments in associates and joint ventures and share in the result of the associates and joint ventures, respectively. Subsidiaries and joint ventures acquired and held exclusively with a view of disposal within twelve months are consolidated and presented in the balance sheet as assets and liabilities held for sale. Business Combinations Acquisitions of businesses are accounted using the acquisition method. The consideration transferred is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred. At acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at that date including the fair valuation of unrecognised assets and liabilities in the balance sheet of the acquiree including mainly customer base and trade name. Non-controlling interests may be initially measured either at fair value or at the proportionate share of the recognised amounts of the acquiree s identifiable net assets. The choice of the measurement principle is made on a transaction by transaction basis. Judgments and estimates In preparing the consolidated financial statements, management is required to make judgments and estimates that affect amounts included in the financial statements. Judgments and estimates that are made at each reporting date reflect conditions that existed at those dates (e.g. market prices, interest rates and foreign exchange rates). Although these estimates are based on management s best knowledge of current events and actions that the Group may undertake, actual results may differ from those estimates. Major judgments and estimates are principally made in the following areas: Claims and contingent liabilities Related to claims and contingencies, judgment is necessary in assessing the existence of an obligation resulting from a past event, in assessing the probability of an economic outflow, and in quantifying the probable outflow of economic resources. This judgment is reviewed when new information becomes available and with support of outside experts advises. Recoverable amount of cash generating units including goodwill In the context of the impairment test, the key assumptions that are used for estimating the recoverable amounts of cash generating units including goodwill are discussed in note 3 (Goodwill). Actuarial assumptions related to the measurement of employee benefit obligations and plan assets The Group holds several employee benefit plans such as pension plans, other post-employment plans and termination plans. In the context of the determination of the obligation, the plan asset and the net periodic cost, the key assumptions that are used are discussed in note 9 (Assets and liabilities for pensions, other post-employment benefits and termination benefits). Acquisition of control in BICS as of 1 January 2010 The shareholders agreement of BICS foresees decision-making rules and a deadlock procedure in force as from 1 January 2010 leading the Group to conclude that it controls BICS as from that date. As a result of this and in application of the revised IFRS 3, BICS is fully consolidated as from 1 January

111 Foreign currency translation Foreign currency transactions The presentation currency for the Group is the Euro. Foreign currency transactions are translated, on initial recognition, at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the entity at the balance sheet date using the exchange rate at that date. Net exchange differences on the translation of monetary assets and liabilities are classified in other operating expenses in the income statement in the period in which they arise. Foreign operations Some foreign subsidiaries and joint-ventures operating in non-euro countries are considered as foreign operations that are integral to the operations of the reporting enterprise. Therefore, monetary assets and liabilities are translated using the exchange rate at balance sheet date, non-monetary assets and liabilities are translated at the historical exchange rate, except for non-monetary items that are measured at fair value in the domestic currency and that are translated at the exchange rate when the fair value was determined. Revenue and expenses of these entities are translated at the weighted average exchange rate. The resulting exchange differences are classified in other operating expenses in the income statement. For other foreign subsidiaries and joint-ventures operating in non-euro countries, assets and liabilities are translated using the exchange rate at balance sheet date. Revenue and expenses of these entities are translated at the weighted average exchange rate. The resulting exchange differences are taken directly to a separate component of equity. On disposal of such entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the income statement. All exchange differences arising from a monetary item that forms part of the Group s net investment in such entity are recognized in the same separate component of equity. Goodwill Goodwill represents the excess of the sum of the consideration transferred, the amount of non-controlling interests, if any, and the fair value of the previously held interest, if any, over the net fair value of identifiable assets, liabilities and contingent liabilities acquired in business combination. When the Group obtains control, the previously held interest in the acquiree, if any, is re-measured to fair value through the income statement. When the net fair value, after reassessment, of identifiable assets, liabilities and contingent liabilities acquired in a business combination exceeds the sum of the consideration transferred, the amount of non-controlling interests, if any, and the fair value of the previously held interest, if any, this excess is immediately recognized in income statement as a bargain purchase gain. Changes in a contingent consideration included in the consideration transferred are adjusted against goodwill when they arise during the provisional purchase price allocation period and when they relate to facts and circumstances existing at acquisition date. In other cases, depending if the contingent consideration is classified as equity or not, changes are taken into equity or in the income statement. Acquisition costs are expensed and non-controlling interests are measured at acquisition date either at their value or at their proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis. Goodwill is stated at cost and not amortized but subject to an annual impairment test at the level of the cash generating unit to which it relates and whenever there is an indicator that the cash generating unit to which the goodwill has been allocated, may be impaired. An impairment loss recognized for goodwill is never reversed in subsequent periods, even if there are indications that the impairment loss may no longer exist or may have decreased. 40

112 Intangible assets with finite useful life Intangible assets consist primarily of the Global System for Mobile communication ( GSM ) license, the Universal Mobile Telecommunication System ( UMTS ) license, 4G licenses, customer bases and trade names acquired in business combinations, internally developed software and other intangible assets such as football rights and broadcasting rights and externally developed software. The Group capitalizes certain costs incurred in connection with developing or purchasing software for internal use when they are identifiable, when the group controls the asset and when future economic benefits from the asset are probable. Capitalized software costs are included in internally generated and other intangible assets and are amortized over three to five years. Intangible assets with finite life acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Intangible assets with finite useful life are stated at cost less accumulated amortization and impairment losses. The residual value of such intangible assets is assumed to be zero. Customer bases and trade names acquired in business combinations are straight-line amortized over their estimated useful life (3 to 20 years). Except when the use of an asset is limited in time, for contractual reasons or reflecting the management intention on the use of the asset, the duration of an asset s useful life is set at acquisition date, for each asset individually, in such a way that the expected cumulated discounted cash flows generated by the concerned asset over its useful life represent approximately 90% of the total cumulated discounted cash flows expected from the asset. GSM, UMTS and 4 G licenses, other intangible assets and internally generated assets with finite useful life are amortized on a straight-line basis over their estimated useful life. Amortization commences when the intangible asset is ready for its intended use. The licenses useful lives are fixed by Royal Decree and they range from 5 to 20 years. The useful lives are assigned as follows: GSM, UMTS, 4G and other network licenses GSM (2G) renewed license (2010) UMTS (3G) LTE (4G) 800 Mhz (4G) Useful life (years) Over the license period Customer bases and trade names acquired 3 to 20 Software Rights to use, football and broadcasting rights Over the contract period 5 (usually from 2 to 5) The 800 Mhz spectrum license (acquired end 2013) is paid by installments over a 20-year period. As a financing is provided by the seller over the lifetime of the license and the period between acquisition and financing is significant, both have been treated as a non-cash transaction in the cash flow statement. Yearly payments to the seller to reduce the outstanding liability are included in the financing activities of the cash flow statement. The amortization period and the amortization method for an intangible asset with finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. Property, plant and equipment Property, plant and equipment including assets rented to third parties are presented according to their nature and are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of additions and substantial improvements to property, plant and equipment is capitalized. The cost of maintenance and repairs of property, plant and equipment is charged to operating expenses when it does not extend the life of the asset or does not significantly increase its capacity to generate revenue. The cost of an item of property, plant and equipment includes the costs of its dismantlement, removal or restoration, the obligation for which the Group incurs as a consequence of installing the item. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognized. 41

113 Depreciation of an asset begins when the asset is ready for its intended use. Depreciation is calculated using the straightline method over the estimated useful life of the asset. The useful lives are assigned as follows: Land and buildings Useful life (years) Land Indefinite Buildings and building equipment 22 to 33 Facilities in buildings 3 to 10 Leasehold improvement and advertising equipment 3 to 10 Technical and network equipment Cables and ducts 15 to 20 Switches 8 to 10 Transmission 6 to 8 Radio Access Network 6 to 7 Mobile sites and site facility equipment 5 to 10 Equipment installed at client premises 2 to 8 Data and other network equipment 2 to 15 Furniture and vehicles Furniture and office equipment 3 to 10 Vehicles 5 to 10 The asset s residual values, useful life and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end. Costs of material, personnel expenses and other operating expenses are shown net of work performed by the enterprise that is capitalized in respect of the construction of property, plant and equipment. Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of a qualifying asset. Impairment of non-financial assets The Group reviews the carrying value of its non-financial assets at each balance sheet date for any indication of impairment. The Group compares at least once a year the carrying value with the estimated recoverable amount of intangible assets under construction and cash generating units including goodwill. The Group performs this annual impairment test during the fourth quarter of each year. An impairment loss is recognized when the carrying value of the asset or cash generating unit exceeds the estimated recoverable amount, being the higher of the asset s or cash generating unit s fair value less costs to sell and its value in use for the Group. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash generating unit. Impairment losses on goodwill, intangible assets and property, plant and equipment are recorded in operating expenses. An assessment is made at each balance sheet date as to determine whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognized. If that is the case, impairment losses in respect of assets other than goodwill are reversed in order to increase the carrying amount of the asset to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement in operating expenses. 42

114 Deferred taxation Deferred taxation is provided for all temporary differences between the carrying amount of assets and liabilities in the consolidated balance sheet and their respective taxation bases. Deferred tax assets associated to deductible temporary differences and unused tax losses carried forward are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary difference or the unused tax losses can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset will be realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Changes in deferred tax assets and liabilities are recognized in the income statement except to the extent that they relate to items recognized directly in equity, in which case the tax effect is also recognized directly in equity. Deferred tax liabilities with respect to temporary differences associated with investments in subsidiaries are recognized except when the parent company is able to control the timing of the reversal of the temporary difference and it is not probable that the difference will be reversed in a foreseeable future. Pensions, other post-employment benefits and termination benefits The Group operates several defined benefit pension plans to which the contributions are made through separately managed funds. The Group also agreed to provide additional post-employment benefits to certain employees. The cost of providing benefits under the plans is determined separately for each plan using the projected credit unit actuarial valuation method. Actuarial gains and losses are recognized through Other Comprehensive Income (equity). Any past service cost and gain or loss on settlement is recognized in income statement when they occur. The Group also operates several defined contribution plans. Contributions are expensed as incurred. The Group operates several restructuring programs that involve termination benefits or other forms of additional compensation. The actuarial gains and losses on these liabilities are recognized in the income statement when incurred. When applying the IAS 19 revised, the Group decided to classify the periodic cost in operating and financing activities for their respective components. Short term and long term employee benefits The cost of all short-term and long-term employee benefits, such as salaries, employee entitlements to leave pay, bonuses, medical aid and other contributions, are recognized during the period in which the employee renders the related service. The Group recognizes those costs only when it has a present legal or constructive obligation to make such payment and a reliable estimate of the liability can be made. 43

115 Financial instruments Fair value of financial instruments The following methods and assumptions were used to estimate the fair value of financial instruments: For investments in quoted companies and mutual funds, the fair value is their quoted price; For investments in non-quoted companies, fair value is estimated by reference to recent sale transactions on the shares of these non-quoted companies and, in the absence of such transactions, by using different valuation techniques such as discounted future cash flow models and multiples methods; For investments in non-quoted companies for which no fair value can be reliably determined, fair value is based on the historical acquisition cost, adjusted for impairment losses, if any; For long term debts carrying a floating interest rate, the amortized cost is assumed to approximate fair value; For long term debts carrying a fixed interest rate, the fair value is determined based on the market value when available or otherwise based on the discounted future cash flows; For trade receivables, trade payables, other current assets and current liabilities, the carrying amounts reported in the balance sheet approximate their fair value considering their short maturity; For cash and cash equivalents, the carrying amounts reported in the balance sheet approximate their fair value considering their short maturity; For derivatives, fair values have been estimated by either considering their quote price on an active market, and if not available by using different valuation techniques, in particular the discounting of future cash flows. Criteria for initial recognition and for de-recognition of financial assets and liabilities Financial instruments are initially recognized when the Group becomes party to the contractual terms of the instruments. Normal purchases and sales of financial assets are accounted for at their settlement dates. Financial assets (or a portion thereof) are de-recognized when either the Group realizes the rights to the benefits specified in the contract, either the rights expire or, either the Group surrenders or otherwise loses control of the contractual rights that comprise the financial asset. Financial liabilities (or a portion thereof) are de-recognized when the obligation specified in the contract is discharged, cancelled or expires. Criteria for offsetting financial assets and liabilities Where a legally enforceable right of offset exists for recognized financial assets and liabilities, and there is an intention to settle the liability and realize the asset simultaneously, or to settle on a net basis, all related financial effects are offset. Criteria for classifying financial instruments as held to maturity Some financial instruments are classified as held to maturity based on the ability and the intention of the Group to keep these instruments until maturity. The Group has already a large experience of respecting that statement. This is reinforced by the fact that the financial instruments classified as held to maturity are medium to short term. Criteria for classifying financial instruments as available-for-sale Non-derivative financial assets that the Group has no intention nor ability to keep until maturity, that the Group does not classify as loans and receivables and that the Group does not designate as at fair value through profit and loss at inception, are classified as available-for-sale. Shares in equity of non-consolidated entities are usually classified as available-for-sale financial assets. Shares in mutual funds or similar funds are classified as available-for-sale, if not designated at fair value through profit and loss at inception. Other participating interests Other participating interests are equity instruments in entities that are not subsidiaries, joint ventures or associates. They are initially recognized at cost, being the fair value of the consideration given and including acquisition costs associated with the investment. These interests are classified as available-for-sale financial assets in the balance sheet. After initial recognition, The participating interests in non-quoted companies for which no fair value can be reliably determined are carried at cost with adjustment for impairment loss if any; All other participating interests are carried at fair value, with recognition of the changes in fair value directly in equity, until the financial asset is sold, collected or otherwise disposed of, at which time the cumulative gain or loss previously reported in equity is included in income statement in net finance cost. 44

116 Other non-current financial assets Other non-current financial assets include derivatives (see below), long-term interest-bearing receivables such as loans to joint-ventures, personnel and cash guarantees and long-term investments such as notes and purchased bonds. Long-term receivables are accounted for as loans and receivables originated by the Group and are carried at amortized cost. Longterm investments are classified as held-to-maturity and are carried at amortized cost. Trade receivables and other current assets Trade receivables and other current assets are shown on the balance sheet at nominal value (generally, the original invoice amount) less the allowance for doubtful debts. Investments Investments include shares in funds and mutual funds, fixed income securities and deposits with a maturity greater than three months but less than one year. Shares are initially recognized at cost, being the fair value of the consideration given and including acquisition costs associated with the investment. After initial recognition, shares are treated as available-for-sale, with re-measurement to fair value recorded directly in equity until the investment is sold, collected or otherwise disposed of, at which time the cumulative gain or loss previously reported in equity is included in income statement. Fixed income securities are initially recognized at cost, being the fair value of the consideration given and including acquisition costs associated with the investment. After initial recognition, fixed income securities that are classified as available-for-sale, are measured at fair value, with gains and losses on re-measurement recognized in equity until the investment is sold, collected or otherwise disposed of, at which time the cumulative gain or loss reported in equity is included in income statement. Fixed income securities that are intended to be held-to-maturity are measured at amortized cost, using the effective interest rate method. Deposits are measured at amortized cost. Cash and cash equivalents Cash and cash equivalents include cash, current bank accounts and investments with an original maturity of less than three months, and that are highly liquid. Cash and cash equivalents are carried at amortized cost. Impairment of financial assets The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired. When the carrying amount of the financial asset is greater than its recoverable amount, an impairment loss is recorded. An allowance account is always used to account for impairment losses, whether impairment is caused by credit losses or not. Allowances and impairment on financial assets are accounted for as other operating expenses when the assets relates to operating activities. For other participating interests, associates and assets relating to finance activities, allowances and impairment losses are accounted for as finance costs. Impairment losses on receivables are determined when it is probable that the Group will not be able to collect any amount due, on basis of individualized criteria or based on portfolio statistics and analysis of ageing balances. In case of impairment due to credit losses, the impairment allowance is reversed when it becomes probable that the Group will collect the financial asset, as a result of various indicators such as the receipt of collaterals, a successful capital increase at the customer etc. The impairment allowance will also be reversed when the asset is definitively sold, collected or at the opposite, uncollectible, at what time, the definitive gain (loss) on disposal of the asset is recorded in income statement. Impairment losses on available for sale equity investments are recognized in net income in case of significant (more than 30%) or prolonged (more than 12 months successively) decline in the fair value below cost. These impairment losses are not reversed in income statement. If it appears that an existing impairment loss has to be reversed, reversal will be recorded in equity, as a re-measurement to fair value. 45

117 Interest-bearing liabilities All loans and borrowings are initially recognized at cost, being the fair value of the consideration received, net of issuance costs associated with the borrowings. After initial recognition, debts are measured at amortized cost using the effective interest rate method, with amortization of discounts or premiums through the income statement. Derivatives The Group makes use of derivatives such as IRS, IRCS, forward foreign exchange contracts and currency options to reduce its risks associated with interest rate and foreign currency fluctuations on underlying assets, liabilities and anticipated transactions. The derivatives are carried at fair value under the captions other assets (non-current and current), interestbearing liabilities (non-current and current) and other payables (non-current and current). The Group uses IRS and IRCS to reduce its exposure to interest rate and foreign currency fluctuations on long-term debts. These economical hedges are not accounted for as hedges. The Group does not hold or issue derivative financial instruments for trading purposes but some of its derivative contracts do not meet the criteria set by IAS 39 to be considered as hedges and are therefore treated as derivatives held-fortrading, with changes in fair value recorded in the income statement. The Group uses currency options and forward foreign exchange contracts to manage its foreign currency exposure arising from operational contracts. When the matching between these instruments and the underlying exposure is sufficiently effective, and the effectiveness can be easily demonstrated, cash flow hedging is applied. i.e. the effective portion of the gains and losses on the hedging instrument is recognized via other comprehensive income until the hedged item occurs; the ineffective portion is recognized in profit or loss. The other forward exchange contracts are not accounted for as hedges and are consequently carried at fair value, with changes in fair value recognized in the income statement. Some debts issued by the Group include embedded derivatives. Such derivatives are separated from their host contract and carried at fair value with changes in fair value recognized in the income statement. The mark-to-market effects on these embedded derivatives are neutralized by those on other derivatives. As from September 2011, the Group started contracting derivatives to hedge its exposure to part of commodity price fluctuations for highly probable forecasted transactions. The Group applies cash flow hedge accounting; the effective portion of the gains and losses on the hedging instrument is recognized via other comprehensive income until the hedged item occurs. If the hedged transaction leads to the recognition of an asset, the carrying amount of the asset at the time of initial recognition is adjusted to include the amount previously recognized via other comprehensive income. The ineffective portion of a cash flow hedge is always recognized in profit or loss. Net gains and losses on financial instruments The Group excludes dividends, interest income and interest charges from the net gains and losses on financial instruments. Dividends, interest income and interest charges arising from financial instruments are posted to the finance income/(costs). Net gains/(losses) from disposals or settlements of financial instruments are accounted for as finance income/(costs) when the instruments relate to financing activities. When the financial instruments relate to operating or investing activities, net gains/(losses) from disposals or settlements are accounted for as other operating income/(expenses). Net gains and losses resulting from fair value measurement of derivatives used to manage foreign currency exposure on operating activities that do not qualify for hedge accounting under IAS 39 are recorded as operating expenses. Net gains and losses resulting from fair value measurement of derivatives used to manage interest rate exposure on interest-bearing liabilities that do not qualify for hedge accounting under IAS 39 are recorded in finance income/(costs). 46

118 Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined based on the weighted average cost method except for IT equipments (FIFO method) and goods purchased for resale as part of specific construction contracts (individual purchase price). For construction contracts, the percentage of completion method is applied. The stage of completion is measured by reference to the amount of contract costs incurred for work performed at balance sheet date in proportion to the estimated total costs for the contract. Contract cost includes all expenditures directly related to the specific contract and an allocation of fixed and variable overheads incurred in connection with contract activities based on normal operating capacity. Leases Leases of assets through which all the risks and the benefits of ownership of the asset are substantially transferred to the Group are classified as finance lease. Finance leases are recognized as assets and liabilities (interest-bearing liabilities) at amounts equal to the lower of the fair value of the leased asset and the present value of the minimum lease payments at inception of the lease. Amortization and impairment testing for depreciable leased assets, is the same as for depreciable assets that are owned. Lease payments are apportioned between the outstanding liability and finance charges so as to achieve a constant periodic rate of interest on the remaining balance of the liability. Leases of assets through which all the risks and the benefits of ownership of the asset are substantially retained by the leasing company are classified as operating lease. Payments under operating leases are recognized as an expense in the income statement on a straight-line basis over the lease term. Provisions Provisions are recognized when the Group has a present legal or constructive obligation resulting from past events, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. A past event is deemed to give rise to a present obligation if, taking into account the available evidence, it is more likely than not that a present obligation exists at the balance sheet date. The amount recognized as provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Provisions are discounted where the effect of the time value of money is material. The unwinding is recognized via the finance expense. Certain assets and improvements that are situated on property owned by third parties must eventually be dismantled, and the property must be restored to its original condition. The estimated costs associated with dismantling and restorations are recorded under property, plant and equipment and depreciated over the useful life of the asset. The total estimated cost required for dismantling and restoration, discounted to its present value, is recorded under provisions. Where discounting is used, the increase in the provision due to the passage in time is recognized in financial expense in the income statement. Assets and associated liabilities classified as held for sale The Group classifies assets (or disposal group) as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through a continuing use. This condition is met when the asset (or disposal group) is available for immediate sale in its present condition, the sale is highly probable and expected to occur within one year. Assets and associated liabilities held for sale (or disposal group) are recorded at the lower of their carrying value or fair value less costs to sell, and are classified as current assets. Share based payment Equity and cash settled share-based payments to employees are measured at the fair value of the instrument at the grant date taking into account the terms and conditions upon which the rights are granted, and by using a valuation technique that is consistent with generally accepted valuation methodologies for pricing financial instruments, and that incorporates all factors and assumptions that knowledgeable, willing market participants would consider in setting the price. For equity settled arrangement the fair value is recognized in personnel expenses over their vesting period, together with an increase of the caption stock compensation of the shareholders equity for the equity part and an increase of a dividend liability for the dividend part. When the share options give right to dividends declared after granting the options, the fair value of this right is re-measured regularly. For cash settled arrangement the fair value is recognized in personnel expenses over their vesting period together with an increase in the liabilities. The liabilities are regularly re-measured to reflect the evolution of the fair values. 47

119 Revenue and operating expenses Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Specific revenue streams and related recognition criteria are as follows: Revenue from wireline, carrier and mobile traffic is recognized on usage; Revenue from connection fees and installation fees is recognized in income at the time of connection or installation; Revenue from sales of communication equipment is recognized upon delivery to the third party distributors or upon delivery by the own Belgacom shops to the end-customer; Revenues relating to the monthly rent or access fees, which are applicable to wireline and mobile revenues are recognized in the period in which the services are provided; Subscription fees are recognized as revenue over the subscription period on a pro-rata basis; Prepaid revenue such as revenue from pre-paid fixed and mobile phone cards is deferred and recognized based on usage of the cards; Maintenance fees are recognized as revenue over the maintenance period on a pro-rata basis; Commissions received are recognized net when the Group acts as an agent, i.e. when the Group does not bear inventory risk and credit risk, does not set the prices nor change or perform part of the services and has no latitude in the supplier s selection; The revenue from sales arrangements with multiple deliverables are allocated to the different components of the arrangements based on their relative fair values being the amount for which each component could be sold separately. However when an amount allocated to a delivered component is contingent upon the delivery of additional components or meeting specified performance conditions, the amount allocated to that delivered component is limited to the non-contingent amount. Net revenue is defined as the gross inflow of economic benefits during the period arising in the course of the ordinary activities and taking into account the amount of any trade discounts and volume rebates allowed by the Group. The award credits (loyalty programs) are recorded as a separate component of the sales transaction and recorded as deduction from the initial sale in net revenue. Revenue from award credits is recognized at redemption. Expenditure on research activities is recognized in the income statement as an expense as incurred. The Group s consolidated income statement presents operating expenses by nature. Operating expenses are reported net of work performed by the enterprise that is capitalized. The costs of materials and services related to revenues include the costs for purchases of materials and services directly related to revenue. Costs for advertising and other marketing charges are expensed as incurred. As a consequence of the new Belgian Telecom law in force as from 1 October 2012 all dealer commissions are expensed as incurred. The accumulated deferred upfront dealer commissions were expensed as cost of materials and services related to revenue. Non-recurring income and non-recurring expenses include gains or losses on the disposal of consolidated companies exceeding individually EUR 5 million, fines and penalties imposed by competition authorities or by the regulator exceeding EUR 5 million, costs of employee restructuring programs and the effect of settlements of post-employment benefit plans. 48

120 Note 3. Goodwill (EUR mi lli o n ) Go o d wi ll As o f 1 Ja n u a ry ,323 Acquisition of Wireless Technologies BVBA 15 As o f 31 D ecemb er ,339 Classified as held for sale -1 Impairment -18 As o f 31 D ecemb er ,320 In 2012 the acquisition of Wireless Technologies BVBA resulted in an increase of goodwill of EUR 15 million (see note 6.4). In 2013 goodwill of two disposal groups was reclassified as held for sale with an impairment loss recognized for an amount of EUR 18 million (see note 16). Goodwill is tested for impairment at the level of operating segments as these are the Group cash-generating units; the performance, financial position (including goodwill) and capital expenditures within the Group are being monitored at operating segment level. For the purpose of impairment testing, goodwill acquired in a business combination is, at acquisition date, allocated to each of the Group operating segments that is expected to benefit from the business combination. Therefore this allocation is based on the nature of the acquired customers and activities. At 31 December 2013, all businesses acquired were fully allocated to one single operating segment, with the exception of the goodwill resulting from the acquisition of noncontrolling interests in 2007 in Belgacom Mobile, which was allocated to the Consumer Business Unit and the Enterprise Business Unit on basis of their relative value in use for the Group at 31 December The carrying amount of goodwill is allocated to the operating segments as follows: As o f 31 D ecemb er (EUR mi lli o n) Consumer Business Unit 1, Enterprise Business Unit 1,073 1,073 International Carrier Services To ta l 2,339 2,320 The recoverable amount at segment level (including goodwill) was based on the value in use estimated through a discounted free cash flow model. The key variables used in determining the value in use are the operating income before depreciation and amortization (except for the International Carrier Services segment for which the direct margin is more important); the capital expenditures; the long term growth rate; the post-tax weighted average cost of capital; the mark-up rate to be applied on staff and support services, should Belgacom Group organize a full and at arm s length transfer pricing between the segments; the expected rate of return on SDE capital employed, allowing the determination of SDE network related costs to be invoiced to the other segments, should Belgacom Group organize a full and at arm s length transfer pricing between the segments. CBU and EBU operating income before depreciation and amortization is highly sensitive to the following operational parameters: number of customers by type of service (TV, fix.), traffic (if applicable) and net ARPU by customer for each type of service. The value attached to each of these operational parameters is the result of an internal process, conducted in each segment and at group level, by confronting data from the market, market perspectives, and the strategies Belgacom intends to implement in order to be adequately prepared for upcoming challenges. For the years 2014 to 2018, the operating segments free cash flows were based on the Five Year Plan as presented by management to the Board of Directorsubsequent years were extrapolated based on a growth rate varying between 0.0% and 1.0% per year (CBU: 0.5%, EBU: 1.0% and ICS: 0.5%), reflecting management vision about the long term evolution of the market and based on historical data. The free cash flows considered for calculating the value in use are estimated for the concerned assets in their current condition and exclude the cash inflows and outflows that are expected to arise from any future restructuring to which the Group is not yet committed and from improving or enhancing the assets performance. Free cash flows of each segment were discounted with the Group post-tax weighted average cost of capital of 6.4%, with the exception of the ICS segment for which a specific post-tax weighted average cost of capital of 9.0% was used, its activities being deemed different enough from those of the rest of the Group to justify a specific calculation. The pre-tax weighted average cost of capital, derived from the post-tax weighted average cost of capital via an iterative method, was comprised between 8.40% and 11.1%. 49

121 The calculated weighted average costs of capital at Group level and for the ICS segment are based on the relative weight of their capital structure components and include a risk premium specific to their inherent risks. None of the goodwill was impaired at 31 December Sensitivity analysis for all segments demonstrates that in case of a reasonable change in one of the key assumptions, their values in use still exceed their net carrying values. Note 4. Intangible assets with finite useful life (EUR mi lli o n ) GSM a n d UMTS li cen s es In tern a lly g en era ted a s s ets Cu s to mer b a s es a n d tra d e n a mes a cq u i red TV ri g hts Other i n ta n - g i b le a s s ets To ta l Co s t As o f 1 Ja n u a ry ,773 Additions Acquisition of subsidiary Disposals Reclassifications As o f 31 D ecemb er ,9 41 Additions Disposals Classified as held for sale As o f 31 D ecemb er ,241 Accu mu la ted a mo rti za ti o n a n d i mp a i rmen t As o f 1 Ja n u a ry ,5 9 6 Amortization charge for the year Disposals Reclassifications As o f 31 D ecemb er ,844 Amortization charge for the year Impairment charge Disposals Classified as held for sale Reclassifications As o f 31 D ecemb er ,05 6 Ca rryi n g a mo u n t a s o f 31 D ecemb er ,09 7 Ca rryi n g a mo u n t a s o f 31 D ecemb er ,185 The GSM and UMTS licenses acquisition value include the costs related to the Global System for Mobile communication ( GSM ) and Universal Mobile Telecommunication System ( UMTS ). In 1994, the Group acquired a GSM license (covering the use of 900 MHz spectrum) in Belgium for an amount of EUR 226 million. Amortization started in 1995 over the initial life of the license (15 years). Since 6 April 2008, the GSM license has been prolonged until 8 April 2015 free of charge. On 15 March 2010, the Belgian State adopted a Law imposing an additional fee for the extension of the 2G licenses until 2015 for EUR 74 million (for 12 MHz duplex), amortized over 5 years. Belgacom has chosen to pay by instalments. On 18 August 2010, Belgacom lodged an annulment procedure before the Constitutional Court against the 15 March 2010 law which the Court rejected on 17 October In March 2001, the Group acquired an UMTS license in Belgium for an amount of EUR 150 million. Amortization started in June 2004 over the initial life of the license that is scheduled to end in In 2011 Belgacom acquired a 4G license in the 2,6 GHz frequency band for an amount of EUR 20 million which was paid in The license is valid for 15 years effective as of 1 July 2012, amortization started as from July In December 2013, the Group acquired a licence for the 800 Mhz frequency band for the amount of EUR 120 million which Belgacom decided to pay by installments. The related outstanding amount that will be settled after more than twelve months is included in other non current payables (note 20). Amortization started in December Customer bases and trade names acquired include intangible assets recognized as part of business combinations; mainly as result of the purchase price allocation performed when the Group acquired control over BICS. TV rights include football rights and broadcasting rights acquired. Some of these rights are acquired with a deferred payment plan. The related liability is classified as trade payable and include EUR 29 million to be settled in more than twelve months. Internally generated assets mainly relate to development expenditures for internally developed software (mainly billing and ordering related). The aggregate amount of research expensed for these internally generated software during 2013 amounts to EUR 23 million. Other intangible assets mainly include purchased software (mainly network related) and rights of use for cables. 50

122 Note 5. Property, plant and equipment (EUR mi lli o n ) Co s t La n d a n d b u i ld i n g s Techni - ca l a n d n etwo rk eq u i p - men t Other ta n g i b le a s s ets As s ets u n d er co n s tru c- ti o n As o f 1 Ja n u a ry , ,6 80 Additions Acquisition of subsidiary Disposals Reclassifications As o f 31 D ecemb er , ,9 12 Additions Disposals Classified as held for sale Reclassifications As o f 31 D ecemb er , ,273 To ta l Accu mu la ted d ep reci a ti o n a n d i mp a i rmen t As o f 1 Ja nua ry , ,279 Depreciation charge for the year Acquisition of subsidiary Disposals Reclassifications As o f 31 D ecemb er , ,445 Depreciation charge for the year Impairment charge Disposals Subsidiaries reclassified as held for sale Reclassifications As o f 31 D ecemb er , ,715 Ca rryi n g a mo u n t a s o f 31 D ecemb er , ,46 7 Ca rryi n g a mo u n t a s o f 31 D ecemb er , ,5 5 8 As a consequence of the gradual evolution to the current renting model for internet modems, Belgacom modems rented to customers are capitalized as from 1 January This resulted in a positive impact on Cost of Sales, while increasing the level of Capex (EUR 28 million). In 2013, the useful life of modems and decoders was increased with one year from 24 to 36 months. 51

123 Note 6. Investments in subsidiaries, joint ventures and associates Note 6.1. Investments in subsidiaries The consolidated financial statements include the financial statements of Belgacom SA and the subsidiaries listed in the following table: Name Registered office Co u n try o f i n co rp o ra ti o n Gro u p 's p a rti ci p a ti n g i n teres ts Belgacom SA under Public Law Bld du Roi Albert II 27 Belgium Mother company 1030 Bruxelles VAT BE Belgacom Finance SA Rue de Merl 74 Luxemburg 100% 100% 2146 Luxembourg Belgacom Group International Services SA Bld du Roi Albert II 27 Belgium 100% 100% 1030 Bruxelles VAT BE BGC Re Rue de Merl 74 Luxemburg 100% 100% 2146 Luxembourg Connectimmo SA Bld du Roi Albert II 27 Belgium 100% 100% 1030 Bruxelles VAT BE Belgacom Skynet SA Bld du Roi Albert II 27 Belgium 100% 100% 1030 Bruxelles VAT BE Skynet imotion Activities SA Rue Carli 2 Belgium 100% 100% 1140 Evere VAT BE Tango SA Rue de Luxembourg 177 Luxemburg 100% 100% 8077 Bertrange Telindus - ISIT BV Krommewetering 7 The Netherlands 100% 100% 3543 AP UTRECHT Telindus SA Route d Arlon Luxemburg (1) 65% 65% 8009 Strassen Telectronics SA 2 Rue des Mines Luxemburg (1) 65% 65% 4244 Esch sur Alzette Beim Weissenkreuz SA Route d Arlon Luxemburg (1) 64% 64% 8009 Strassen Telindus LTD Centurion - Riverside Way - Watchmoor Park United Kingdom (1) 100% 100% Camberley - Surrey -GU15 3 YL Telindus France SA ZA de Courtaboeuf- 12, Avenue de l'oceanie France (1) 100% 100% Les Ulis Groupe Telindus France SA ZA de Courtaboeuf- 12, Avenue de l'oceanie France (1) 100% 100% Les Ulis Telindus Morocco SAS Bâtiment shore 1, 6ème étage, Casablanca Nearshore Park, 1100 Bd. Al Qods, Sidi Maârouf Morocco (1) (3) 100% 100% Casablanca Belgacom Bridging ICT NV Koning Albert II laan 27 Belgium 100% 100% 1030 Brussels VAT BE Belgacom ICT - Expert Community CVBA Ambachtenlaan 34 Belgium 88% 84% 3001 Heverlee VAT BE Belgacom Opal SA Bld du Roi Albert II 27 Belgium 100% 100% 1030 Bruxelles VAT BE Beldiscom SA Bld d'avroy 240 Belgium (10) 100% Liege VAT BE Mobile-For SA Bld du Roi Albert II 27 Belgium 100% 100% 1030 Bruxelles VAT BE Scarlet NV Ketelmeerstraat 182 The Netherlands (2)(8) 100% 100% 8226JX Lelystad Scarlet Business NV Carlistraat 2 Belgium (2) 100% 100% 1140 Evere VAT BE Scarlet Luxembourg SARL Rue de Bonnevoie 5 Luxemburg (2) 100% 100% 1260 Luxembourg Scarlet Belgium NV Carlistraat 2 Belgium (2) 100% 100% 1140 Evere VAT BE MBS TELECOM NV Carlistraat 2 Belgium (2) (3) 100% 100% 1140 Evere BE Sahara Net LLC Al-Dabal Commercial Tower (ACT) 2nd Floor, Prince (9) 70% 70% Mohammad Quarter, Prince Mohammad Street (First Street) Saudi-Arabia P.O. Box 5480 Zip Code Damman Wireless Technologies NV Stationstraat 34 Belgium (5) 100% 100% 1702 Groot Bijgaarden VAT BE Belgacom International Carrier Services Mauritius Ltd Chancery House 5th floor, Lislet, Geoffroy Street Mauritius (4), (6) 58% 58% Port Louis Belgacom International Carrier Services SA Rue Lebeau 4 Belgium (4) 58% 58% 1000 Brussels VAT BE Belgacom International Carrier Services Deutschland GMBH Mendelssohnstrasse 87 Germany (4) 58% 58% Frankfurt 52

124 Name Registered office Co u n try o f i n co rp o ra ti o n Gro u p 's p a rti ci p a ti n g i n teres ts Belgacom International Carrier Services UK Ltd Great Bridgewater Street 70 United Kingdom (4) 58% 58% M1 5ES Manchester Belgacom International Carrier Services Nederland BV Wilhelminakade 91 The Netherlands (4) 58% 58% 3072 AP Rotterdam Belgacom International Carrier Services North America Inc Corporation trust center Orange street United States (4) 58% 58% USA Willington Delaware Belgacom International Carrier Services Asia Pte Ltd 80, Robinson Road # 02-00, Singapore (4) 58% 58% Singapore Belgacom International Carrier Services (Portugal) SA Avenida da Republica, 50, 10th floor Portugal (4) 58% 58% Lisbon Belgacom International Carrier Services Italia Srl Via della Moscova 3 Italy (4) 58% 58% Milano Belgacom International Carrier Services Spain SL Avenida de Aragon, 330 Spain (4) 58% 58% Edificio 5, Madrid Belgacom International Carrier Services Switzerland AG Papiermülhestrasse 14 Switzerland (4) 58% 58% 3014 Bern Belgacom International Carrier Services Austria GMBH Wildpretmarkt 2-4 Austria (4) 58% 58% 1010 Wien Belgacom International Carrier Services Sweden AB Drottninggatan 30 Sweden (4) 58% 58% Goteborg Belgacom International Carrier Services JAPAN KK #409 Raffine Higashi Ginza, 4-14 Japan (4) 58% 58% Tsukiji 4 - Chome - Chuo-ku Tokyo Belgacom International Carrier Services China Ltd Three Pacific Place - Level 28 China (4) 58% 58% 1, Queen's road East Hong Kong Belgacom International Carrier Services Ghana Ltd Box GP 821 Ghana (4) 58% 58% Accra Belgacom International Carrier Services Dubai FZ-LLC P.O. Box United Arab. Emirates (4) (7) - 58% Dubai Belgacom International Carrier Services South Africa Proprietary Ltd Central Park n Jean Avenue, Centurion South Africa (4)(7) - 58% Gauteng 0157 Belgacom International Carrier Services Kenya Ltd LR-N , 1st Floor Block A Kenya (4)(7) - 58% Nairobi Business Park Ngong Belgacom International Carrier Services France SAS Rue du Colonel Moll 3 France (4) 58% 58% Paris (1) Subsidiaries of the Group Telindus (2) Entity of Group Scarlet (3) Entity indirectly controlled by the Group (4) Entity of BICS Group (5) Entity acquired in 2012 (6) Entity incorporated in 2012 (7) Entity incorporated in 2013 (8) Entity in liquidation (9) Entity held for sale (10) Entity liquidated in 2013 The financial year end of Telindus- ISIT BV is 30 June. For consolidation purpose additional financial statements are prepared as per 31 December. 53

125 Note 6.2. Investments in joint ventures The Group has a joint-venture interest in the following companies: Name Registered office Co u n try o f i n co rp o ra ti o n Gro u p 's p a rti ci p a ti n g i n teres ts Belgacom Mobile Wallet SA/NV Koning Albert II-laan 27 Belgium (1) 50% 1030 Schaarbeek VAT BE Allo Bottin SA 101/109, rue Jean-Jurès France (2) 50% 50% Levalloi-Perret E-Port Communications Systems SA Slijkensesteenweg 2 Belgium 50% 50% 8400 Oostende VAT BE (1) Entity incorporated in 2013 (2) In liquidation In November 2013 Belgacom and BNP Paribas Fortis set up Belgacom Mobile Wallet SA a joint venture to support online and mobile trade in Belgium. It will be commercially launched under the brand Sixdots. Note 6.3. Investments in associates The Group has a significant influence in the following company: Name Registered office Co untry o f i nco rp o ra ti o n Gro up 's p a rti ci p a ti ng i nteres ts ClearMedia NV Zagerijstraat 11 Belgium 40% 40% 2960 Brecht VAT BE Note 6.4. Acquisitions and disposal of subsidiaries, joint ventures and associates Acquisition of 2012 On January 2, 2012 the Group acquired Wireless Technologies BVBA for an amount of EUR 23 million (net of cash acquired). The fair value of the identifiable assets and liabilities of these acquisitions at the date of acquisition and the corresponding carrying amounts immediately prior to the acquisition were: Fa i r va lu e (EUR mi lli o n ) reco g n i s ed o n a cq u i s i ti o n Ca rryi n g va lu e Non current fixed assets 11 6 Inventories 8 8 Trade receivables 10 9 Other current assets 9 9 Investments and cash and cash equivalents 1 1 To ta l a s s ets Deferred income tax liabilities -2 0 Trade payables Other current payables -9-8 To ta l n o n -co n tro lli n g i n teres ts a n d li a b i li ti es Net a s s ets a cq u i red 9 10 Goodwill arising on acquisition 15 Co n s i d era ti o n 24 The co n s i d era ti o n i s d eta i led a s fo llo ws : Cash paid to shareholders 25 Cash to be received from shareholders -1 Co n s i d era ti o n 24 The ca s h o u tflo w o n a cq u i s i ti o n i s a s fo llo ws : Consideration paid 24 Net cash acquired of the subsidiary -1 Net ca s h o u tflo w 23 54

126 Note 7. Other participating interests The net carrying amount of other participating interests evolved on the following way: As o f 31 D ecemb er (EUR millio n ) Net ca rryi n g a mo u n t a s o f 1 Ja n u a ry 31 7 Additions 4 1 Participation interest absorbed or liquidated 0-6 Reversal of impairment loss due to absorbtion or liquidation Reversal of impairment loss 0 5 Impairment loss To ta l 7 6 As o f 31 D ecemb er (EUR millio n ) Cost Accumulated impairment losses Net ca rryi n g a mo u n t 7 6 In 2012, the Group recognized an impairment loss of EUR 27 million mainly on the investment in Onlive. In 2013 an additional impairment loss on other participating interests of EUR 1 million was recognized. At 31 December 2012 and 2013, the other participating interests included almost exclusively shares in equity of nonconsolidated and non-quoted entities for which no fair value can be reliably determined. It is not the Group s intention to divest these participating interests in the short term. The fair values of these participations cannot be reliably estimated as concerning start-up companies to which commonly used valuation techniques cannot be applied. The valuation technique commonly used within Belgacom Group to assess the fair value of a participating interest in an entity is its share in the present value of the entity estimated future free cash flows. However, in the case of start-up entities, the estimated future free cash flows cannot be reliably estimated as their business models are still too volatile. Furthermore, the use of other valuation techniques (such as recent arm s length market transaction, valuation of comparable entities...) is not possible seen the absence of such data. Note 8. Income taxes Gross deferred income tax assets / (liabilities) relate to the following: As o f 31 D ecemb er (EUR millio n ) 2012 res ta ted 2013 Deferred income tax liabilities Accelerated depreciation for tax purposes -7-5 Fair value adjustments on acquisition Statutory provisons not retained under IFRS -1-1 Deferred taxation on sales of property, plant and equipment -5-8 Other Gro s s deferred inco me ta x lia bilities Deferred income tax assets Fair value adjustment on fixed assets Remeasurement of financial instruments to fair value 7 3 Liability for post-employment and termination benefits Tax losses carried forward 2 1 Capital losses on investments in subsidiaries 1 1 Other Gro s s d eferred i n co me ta x a s s ets Net deferred income tax assets / (liabilities), when grouped per taxable entity, are as follows : Net deferred inco me ta x lia bility Net d eferred i n co me ta x a s s et The deferred income tax liabilities decreased in 2013 mainly as a result of the amortization of the assets recognized in 2010 in the purchase price allocation of BICS when the Group acquired control. The deferred income tax asset decreased in 2013 as a consequence of the payment of post employment benefits. Deferred tax assets have not been recognized in respect of the losses of subsidiaries that have been loss-making for several years. Cumulative tax losses carried forward and tax deductions available for such companies amounted to EUR 283 million at 31 December 2013 (EUR 257 million in 2012) of which EUR 205 million has no expiration date, EUR 18 million and EUR 24 million expire respectively in 2014 and 2015 and EUR 36 million has a longer expiration date. The share of Belgacom in the undistributed retained profit of subsidiaries amounts to EUR 4,524 million at 31 December 2013 (EUR 4,938 million in 2012) and is taxable at an effective tax rate of 1.7% upon profit distribution to the parent company No deferred tax liability is recorded for temporary differences associated with investments in subsidiaries except when the parent company controls the reversal of the temporary difference and it is probable that the difference will be reversed in a foreseeable future. 55

127 In the income statement, deferred tax income/ (expense) relate to the following: Yea r en d ed 31 D ecemb er (EUR millio n ) 2012 res ta ted 2013 Relating to deferred income tax liabilities Accelerated depreciation for tax purposes 1 2 Fair value adjustments on acquisition Statutory provisons not retained under IFRS -1-1 Deferred taxation on sales of property, plant and equipment 0-3 Other 18-3 Relating to deferred income tax assets Fair value adjustment on fixed assets 0-5 Remeasurement of financial instruments to fair value -2-4 Liability for post-employment and termination benefits Tax losses carried forward -7 0 Other 10-4 D eferred ta x exp en s e o f the yea r 6-23 The consolidated income statement includes the following tax expense: As o f 31 D ecemb er (EUR millio n ) 2012 res ta ted 2013 Current income tax Current income tax expense Adjustments in respect of current income tax of previous periods Deferred income tax Expense resulting from changes in temporary differences Expense resulting from use of tax losses carried forward and tax credits -7 0 In co me ta x exp en s e rep o rted i n co n s o li d a ted i n co me s ta temen t The reconciliation of income tax expense applicable to income before taxes at the statutory income tax rate to income tax expense at the group's effective income tax rate for each of the two years ended is as follows: As o f 31 D ecemb er (EUR millio n ) 2012 res ta ted 2013 In co me b efo re ta xes At Belgian statutory income tax rate of 33.99% Lower income tax rates of other countries -1-1 Income tax consequences of capital losses on investments in subsidiaries Non-taxable income from subsidiaries and notional interest deduction Non-deductible expenditures for income tax purposes Other In co me ta x exp en s e Effective inco me ta x ra te % 20.65% The effective tax rate was 20.7% for 2013, this is slightly above the effective rate of 19.5% for the year 2012 which included an accelerated use of tax losses. The 2013 tax rate results from the application of the general principles of Belgian tax law. The non-taxable income from subsidiaries and notional interest deduction mainly relates to the application of general principles of tax law. Non-deductible expenditures for income tax purposes primarily relate to various expenses that are disallowed for tax purposes and unrecognized tax losses carried forward. Note 9. Assets and liabilities for pensions, other post-employment benefits and termination benefits Belgacom applies IAS 19 as revised in 2011 that is applicable as from 1st January 2013 with retrospective application. This means that the opening balance sheet of 2012 and the year 2012 have been restated. The major changes relate to the recognition of actuarial gains and losses and the alignment of the expected rate of return on plan assets to the discount rate. The Group has several plans that are summarized below: (EUR millio n ) As o f 1 Ja n u a ry 2012 res ta ted As o f 31 D ecemb er res ta ted Termination benefits and additional compensations in respect of restructuring programs Defined benefit plans for complementary pension plans (net liability) Post-employment benefits other than pensions Other liabilities Net li a b i li ty reco g n i zed i n the b a la n ce s heet The calculation of the liability is based on the assumptions established at the balance sheet date. The assumptions for the various plans have been determined based on both macro-economic factors and the specific terms of each plan relating to the duration and the beneficiary population, in order to apply the most relevant measure of estimated outflow of resources. 56

128 The discount rate used for the valuation of pension plans, other post-employment benefit plans and termination benefits is based on the yield of Eurozone high quality corporate bonds with a duration matching the duration of such plans. Publicly available yield curves for such type of bonds are usually limited to 10 years horizon. For longer durations, such as for the complementary pension plans and other post-employment benefits, although no yield curve is directly available, the depth of the market is sufficient to allow the determination of a discount rate for IAS 19 purposes. Belgacom estimates the appropriate discount rate on the basis of available market data. Estimations provided by independent third parties are used for validation purpose. These third party estimations are mainly based on two different methodologies.and the retained discount rate falls within the interval of the results of these methodologies. The first methodology consists in building a synthetic yield curve on the basis of the existing high quality corporate bonds. The second methodology consists in combining the risk-free rate for the duration with a credit risk premium to reflect the spread of high quality corporate bonds versus the risk free rate. Note 9.1. Termination benefits and additional compensations in respect of restructuring programs Termination benefits and additional compensations included in this chapter relate to employee restructuring programs. No plan assets are accumulated for these benefits. In 2005, the Group implemented a leave program and a career outphasing program (tutorship). Under the terms of the plan, the Group will pay benefits until the year In 2007, the Group implemented a voluntary external mobility program to the Belgian State for its statutory employees and a program for unfit statutory employees. Under the terms of this plan, the Group will pay benefits until retirement date of the participant. In 2012, the liability increased with EUR 15 million via non-recurring expenses (see note 28) as a result of change in the legal pension age and new entrants in the plan. Any subsequent re-measurement of the liability for termination benefits and additional compensations is recognized immediately in the income statement. The funded status of the plans for termination benefits and additional compensations is as follows : As o f 1 Ja nua ry As o f 31 D ecemb er (EUR millio n) 2012 res ta ted 2012 res ta ted 2013 Defined Benefit Obligation Plan assets at fair value B enefi t o b li g a ti o n i n exces s o f p la n a s s ets The movement in the net liability recognized in the balance sheet is as follows : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 At the beginning of the year Total expense for the period 22 2 Actual employer contribution At the en d o f the yea r The liability for termination benefits and additional compensations was determined using the following assumptions: As o f 31 D ecemb er res ta ted Discount rate 0.00% % 0.00% % Future price inflation 2.00% 2.00% Sensitivity analysis An increase or decrease of 0.5% in the effective discount rate involves a fluctuation of the liability by approximately EUR 1 million. The Group expects to pay an amount of EUR 51 million for termination benefits and additional compensations in Note 9.2. Defined contribution and benefit plans for complementary pensions Defined contribution plans The Group has some plans based on contributions for qualifying employees. For most of the plans which are operated abroad, the Group does not guarantee a minimum return on the contribution. These plans are not material for the Group Defined benefits plans Belgacom SA and some of its Belgian subsidiaries have a joint complementary defined benefit pension plan for their employees. This plan provides pension benefits for services as of 1 January It provides a benefit based on salary and years of service. It is financed through the Belgacom Pension Fund, a legally separate entity created in 1998 for that 57

129 purpose. The financing method is intended to finance the current value of future pension obligations (defined benefit obligation DBO) relating to the years of service already rendered in the company and taking into account future salary increase. The financing method is derived from calculations under IAS 19 standard before revision The annual contribution is equal to the sum of the service cost, the net financial cost (interest cost on DBO minus the expected return on assets) and the amortization of actuarial gains and losses exceeding the 10% corridor. At 31 December 2012 and in 2013, the assets of the Pension Fund exceed the minimum required by the pension regulator, being the technical provision. The technical provision represents the amount needed to guarantee the short-term and long-term equilibrium of the Pension Fund. It is constituted of the vested rights increased with an additional buffer amount in order to guarantee the long-term durability of the pension financing. The vested rights represent the current value of the accumulated benefits relating to years of service already rendered in the company and based on current salaries. They are calculated in accordance with the pension rules and applicable law fixing actuarial assumptions. As for most of defined benefit plans, the pension cost can be impacted (positively or negatively) by parameters such as interest rates, future salary increase, inflation and return on assets. These risks are not unusual for defined benefit plans. The investment strategy of the Pension Fund is defined with a view to offer the best return on investment, within the strict limits of risk control and taking into account the profile of the pension obligations. The relatively long duration of the pension obligations (17 years) allows to allocate a reasonable portion of its portfolio to equities. Telindus BV, a subsidiary established in the Netherlands, has a complementary defined benefit pension plan for its employees which is changed from a final pay to an average pay scheme applicable as from 2014 and is financed through an insurance company. This plan is not material for the Group. For all pension plans, the actuarial valuations are carried out at 31 December by external independent actuaries. The present value and the current service cost and past service cost, are measured using the projected unit credit method. The funded status of the pension plans is as follows : (EUR mi lli o n) 01/01/2012 res ta ted Defined Benefit Obligation Plan assets at fair value D efi ci t / (s urp lus ) As o f 31/12/2012 res ta ted 31/12/2013 The components recognized in the income statement and other comprehensive income are as follows : Yea r en d ed 31/12/ /12/2013 (EUR mi lli o n ) res ta ted Current service cost - employer Net interest 1 2 Past service cost recognized 0-1 Reco g n i zed i n the i n co me s ta temen t Remea s urements Actuarial gains and losses from changes in financial assumptions 31-9 Actuarial gains and losses arising from experience adjustments 4-1 (Return) on assets, excluding interest income Reco g n i zed i n o ther co mp rehen s i ve i n co me To ta l The movement in the net liability recognized in the balance sheet is as follows : (EUR mi lli o n ) Yea r en d ed 31/12/ /12/2013 res ta ted At the beginning of the year Expense for the period recognized in the income statement Remeasurement recognized in other comprehensive income Actual employer contribution Net d efi ci t

130 Change in plan assets : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 At the beginning of the year Interest income Return on assets, excluding interest income 22 9 Actual employer contribution Benefits payments and expenses -7-6 At the en d o f the yea r Change in the defined benefit obligation : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 At the beginning of the year Service cost Interest cost Benefits payments and expenses -7-6 Actuarial (gains) / losses At the en d o f the yea r The pension liability was determined using the following assumptions : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 Discount rate 4.00% 4.00% Future price inflation 2.00% 2.00% Nominal future salary increase 2.00% % 2.00% % Nominal future baremic salary increase 3.00% % 3.00% % Sensitivity analysis Significant actuarial assumptions for the determination of the defined benefit plans obligations are discount rate, inflation and real salary increase. The sensitivity analysis has been determined based on reasonably possible changes of the respective assumptions, while holding the other assumptions constant. If the discount rate changes by 1%, the estimated impact on the defined benefit obligation would be a decrease or increase by around 15%. If the inflation rate varies by 0.25%, the defined benefit obligation would decrease or increase by around 4%. If the real salary increase varies with 0.25%, the defined benefit obligation would decrease or increase by around 10%. The assets of the pension plans are detailed as follows: As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 Equity instruments 43.10% 46.10% Debt instruments 40.30% 36.50% Convertible bonds 9.70% 9.60% Other (property, infrastructure, Private equity funds, insurance deposits) 6.90% 7.80% Nearly all investments are done via mutual investment funds or insurance deposits. Direct investments amount for less than 1% of the assets. Virtually all equity instruments, debt instruments and convertible bonds have quoted prices in active markets. The other assets, amounting for 7.8% of the portfolio are not quoted. The Pension Fund does not directly invest in Belgacom shares or bonds, but it is not excluded that some Belgacom shares or bonds are included in some of the mutual investment funds in which we invest. The Group expects to contribute an amount of EUR 36 million to these pension plans in Note 9.3. Post-employment benefits other than pensions Historically, the Group grants to its retirees post-employment benefits other than pensions in the form of socio-cultural aid premium and other social benefits including hospitalization. There are no plan assets for such benefits. The hospitalization plan is based on an indexed lump sum per beneficiary. The funded status of the plans is as follows : (EUR millio n) As o f 1 Ja nua ry As o f 31 D ecemb er res ta ted res ta ted Defined Benefit Obligation Plan assets at fair value Net li a b i li ty reco g ni zed i n the b a la nce s heet

131 The components recognized in the income statement and other comprehensive income are as follows : Yea r en d ed 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 Current service cost - employer 2 3 Interest cost Reco g n i zed i n the i n co me s ta temen t Remea s urements Actuarial gains and losses from changes in financial assumptions 53 0 Effect of experience adjustments 6 1 Reco g n i zed i n o ther co mp rehen s i ve i n co me 59 1 To ta l The movement in the net liability recognized in the balance sheet is as follows : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 At the beginning of the year Expense for the period recognized in the income statement Remeasurement recognized in other comprehensive income 59 1 Actual employer contribution At the en d o f the yea r Change in the defined benefit obligation : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 At the beginning of the year Service cost 2 3 Interest cost Distributions to beneficiaries Actuarial (gains) / losses 59 1 At the en d o f the yea r The liability for post-employment benefits other than pensions was determined using the following assumptions : As o f 31 D ecemb er res ta ted Discount rate 3.50% 3.50% Future cost trend (index included) 2.00% 2.00% Mortality MR/FR -2 MR/FR -2 The liability for post-employment benefits other than pensions is determined based on the entity s best estimate of the financial and demographic assumptions which are reviewed on an annual basis. The average duration of the obligation is 13 years. Sensitivity analysis Significant actuarial assumptions for the determination of the defined benefit plans obligations are discount rate, inflation, future cost trend and mortality. The sensitivity analysis has been performed based on reasonably possible changes of the respective assumptions, while holding the other assumptions constant. If the discount rate changes by 1%, the defined benefit obligation would decrease or increase by around 12%. If the future cost trend varies by 1%, the defined benefit obligation (excluding medical cost) would decrease or increase by around 7%. If the future medical cost trend varies by 1%, the related defined benefit obligation would decrease or increase by around 5%. If the mortality correction age (MR/FR -2) changes with 1 year (to MR/FR -3), the defined benefit obligation would increase by around 3%. The Group expects to contribute an amount of EUR 16 million to these plans in Note 9.4. Other liabilities The Group has a legal obligation to pay child allowance benefits to a limited number of statutory retirees and to the beneficiaries of the employee restructuring programs. Telindus France has a legal obligation to pay a one-time post-employment benefit in accordance with local law in France. 60

132 Those amounts are directly paid by the Group and therefore no plan assets are accumulated for such benefits. Any subsequent re-measurement of the liability is recognized immediately in the income statement. The funded status is as follows : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 Defined Benefit Obligation Plan assets at fair value 0 0 Net li a b i li ty reco g n i zed i n the b a la n ce s heet The liability was determined using the following assumptions : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 Discount rate 3.00% 2.30%-3.00% Future price inflation 2.00% 2.00% Note 10. Other non-current assets As o f 31 D ecemb er (EUR millio n) No te Other derivatives Other financial assets Other assets To ta l Note 11. Inventories As o f 31 D ecemb er (EUR millio n) Raw materials, consumables and spare parts Work in progress and finished goods Goods purchased for resale To ta l Inventory is reported net of allowances for obsolescence. Note 12. Trade receivables Most trade receivables are non-interest bearing and are usually on days terms. Terms are somehow longer for the receivables of the International Carrier Services segment, since major part of its trade receivables on other Telco operators are paid via netting agreements. The analysis of trade receivables that were past due but not impaired is as follows: As o f 31 D ecemb er Gro s s recei va b les Allo wa n ce fo r d o u b tfu l d eb to rs Net ca rryi n g a mo u n t Nei ther p a s t d u e n o r i mp a i red Past due but not impaired (EUR million ) < 30 days days days days days > 360 days , , , , , , As of 31 December 2012 and 2013, respectively 69% and 74% of the net carrying amount of the trade receivables were neither past due nor impaired. For the two years presented, no trade receivables were pledged as collaterals. In 2013, Belgacom Group received bank and parent guarantees of EUR 9 million (in 2012 EUR 7 million) as securities for the payment of outstanding invoices. The evolution of the allowance for doubtful debtors is as follows: (EUR millio n) No te As o f 1 Ja nua ry Decrease / (increase) posted in operating expenses Variation due to subsidiary classified as assets held for sale 0 1 Other movements 3 2 As o f 31 December

133 Note 13. Other current assets As o f 31 D ecemb er (EUR millio n) No te VAT receivables Other derivatives Prepaid expenses Other receivables To ta l Note 14. Investments As o f 31 D ecemb er (EUR millio n) Note Deposits Treasury certificates Shares in Funds To ta l Investments include shares in funds and mutual funds, treasury certificates and deposits with an original maturity greater than three months but less than one year. As o f 31 D ecemb er (EUR millio n) Cost Net ca rryi ng a mo unt Note 15. Cash and cash equivalents As o f 31 D ecemb er (EUR millio n) Fixed income securities Short-term deposits Cash at bank and in hand To ta l The Group invests part of its liquidities in treasury certificates held-to-maturity. Short-term deposits are made for periods varying between one month and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. Cash at bank earns interest at floating rates based on daily bank deposit rates. Note 16. Assets classified as held for sale In December 2013, the Group entered into an agreement to dispose Sahara Network Company Limited registered in Damman, Kingdom of Saudi Arabia, which is engaged in telecommunication and information technology business. Also in December 2013, an agreement was reached on the disposal of the business of Scarlet NV, a telecommunication service provider in the Netherlands, in the context of a liquidation of this company. On 31 December 2013, the criteria to classify both entities as held for sale were met leading to the recognition of impairment losses for EUR 22 million (of which EUR 17 million through non-recurring expenses) as the proceeds for both transactions will be lower than the carrying amount of the related assets and associated liabilities. Both transactions are expected to be completed in first half of 2014 after fulfillment of conditions precedent, on which date the control of the operations will pass to the acquirers. The major classes of assets and liabilities of the related businesses at the end of the reporting period are as follows: As o f 31 D ecemb er (EUR millio n ) 2013 Goodwill 1 Property, plant and equipment 2 Trade receivables 6 Other current receivables 2 As s ets o f the d i s p o s a l g ro u p s 11 Non current liabilities -2 Current liabilities -11 Li a b i li ti es a s s o ci a ted wi th the d i s p o s a l g ro u p -13 Net li a b i li ti es o f the b u s i n es s es cla s s i fi ed a s held fo r s a le -2 62

134 Note 17. Equity Note 17.1 Shareholders equity At 31 December 2013, the share capital of Belgacom SA amounted to EUR 1 billion (fully paid up), represented by 338,025,135 shares, with no par value and all having the same rights, provided such rights are not suspended or cancelled in the case of treasury shares. The Board of Directors of Belgacom SA is entitled to increase the capital for a maximum amount of EUR 200 million. The Company may acquire its own shares and transfer the shares thus acquired in accordance with the provisions of the Commercial Companies Code. The Board of Directors is empowered by article 13 of the Articles of Association to acquire the maximum number of own shares permitted by law. The price paid for these shares must not be more than five percent above the highest closing price in the thirty-day trading period preceding the transaction nor more than ten percent below the lowest closing price in that same thirty-day period. Said authorization is granted for a period of five years starting on 8 April Distribution of retained earnings of Belgacom SA, the parent company, is limited by a restricted reserve built up in prior years in accordance with Belgian Company Law up to 10% of Belgacom s issued capital. Belgacom SA has a statutory obligation to distribute 5% of the parent company income before taxes to its employees. In the accompanying consolidated financial statements, this profit distribution is accounted for as personnel expenses. On 31 December 2013, the number of treasury shares amounts to 18,820,954 of which 4,148,478 entitled to dividend rights and 14,672,476 without dividend rights. Dividends allocated to treasury shares entitled to dividend rights are accounted for under the caption Reserves not available for distribution in the statutory financial statements of Belgacom SA. In 2012 and 2013, the Group sold respectively 208,433 and 219,935 treasury shares to its senior management for EUR 3 million under discounted share purchase plans at a discount of 16.70% (see note 36). During the years 2012 and 2013, employees exercised respectively 464,411 and 662,581 share options. In order to honor its obligation in respect of these exercises, Belgacom used treasury shares (see note 36). In 2013, no share options were granted by the Group to its key management and senior management. In 2012, the Group granted 840,732 share options to its key management and senior management with an exercise price of EUR (see note 36). In 2012 Belgacom converted 612,356 treasury shares without dividend rights into treasury shares entitled to dividend rights in order to cover the outstanding stock options with dividend rights. Number of shares (including treasury shares): As o f 1 Ja nua ry 338,025, ,025,135 As o f 31 Decemb er 338,025, ,025,135 Number of treasury shares: As o f 1 Ja nua ry 20,376,314 19,703,470 Sale under a discounted share purchase plan -208, ,935 Exercice of stock option -464, ,581 As o f 31 Decemb er 19,703,470 18,820,954 Note 17.2 Non-controlling interests Non-controlling interests include The 42.4% of the minority shareholders (Swisscom and MTN Dubai) into BICS as from 1 January 2010; The 30% stake of the minority shareholder in the equity and net income of Sahara Net LCC; The 35.30% stake of the minority shareholder Arcelor Mittal in the equity and net income of Telindus SA (established in Luxembourg) and subsidiaries (see note 6). 63

135 Note 18. Interest-bearing liabilities Note 18.1 Non-current interest-bearing liabilities As o f 31 D ecemb er (EUR mi lli o n) No te Unsubordinated debentures 1,672 1,919 Leasing and similar obligations 2 2 Other derivatives To ta l 1,761 1,950 All long term debt is unsecured. During 2012 and 2013 there have been no defaults or breaches on loans payables. Over the two years presented, interest rate swaps (IRS) and interest rate and currency swaps (IRCS) were used to manage the currency and interest rate exposure on the JPY unsubordinated debentures. The swaps enabled the Group to transform the interest rate on these debentures from a fixed interest rate to a floating interest rate or vice versa. Unsubordinated debentures in EUR and in JPY are issued by Belgacom SA. The capital is repayable in full on the maturity date. In March 2013 the Group issued a fifteen-year unsubordinated bond of EUR 150 million under the Euro Medium Term Note program and in May 2013 a ten year unsubordinated bond of 100 million partially offsetting the reimbursement of a loan maturing in December 2013, for a nominal amount of EUR 125 million. The foreign currency exposure on liabilities in JPY is fully hedged economically by interest rate and currency swaps converting these liabilities in JPY into liabilities in EUR (see note 33). Non-current interest-bearing liabilities as of 31 December 2013 are summarised as follows: Ca rryi n g a mo u n t Non -current interest-bearing liabilities No mi n a l a mo u n t Mea s u remen t u n d er IAS 39 Ma tu ri ty d a te In teres t p a ymen t / rep ri cea b le In teres t ra te p a ya b le (EUR million ) (EUR million ) (b ) Effecti ve interest rate Unsubordinated debentures Floating rate borrowings JPY (a) Amortized cost Dec-26 Semi-annually 0.20% 0.20% Fixed rate borrowings EUR Amortized cost Nov-16 Annually 4.38% 4.50% EUR Amortized cost Nov-16 Annually 4.38% 7.16% EUR Amortized cost Feb-18 Annually 3.88% 4.05% EUR Amortized cost Mar-28 Annually 3.19% 3.22% EUR Amortized cost May-23 Annually 2.26% 2.29% 1,6 80 1,700 JPY (a) Amortized cost Nov-15 Annually 6.18% 6.18% JPY (a) Amortized cost Dec-15 Annually 6.21% 6.21% Total unsubordinated debentures 1,919 1,917 Leasing and similar obligations EUR 2 2 Amortized cost 2017 Quarterly 4.88% 4.88% 2 2 Total non -current financial liabilities (derivatives excluded ) 1,921 1,919 D eri va ti ves Derivatives held-for-trading (c) 28 0 Fair value To ta l 1, ,9 19 Current portion of interest-bearing -liabilities > 1 year Leasing and similar obligations Fixed rate borrowings EUR 2 2 Amortized cost 2017 Quarterly 4.88% 4.88% To ta l 2 2 (a) converted into a loan in EUR via currency interest rate swap (b) for floating rate borrowings, interest rate is the one prevailing at the last repricing date before 31 December 2013 (c) economic hedges of JPY borrowings 64

136 Non-current interest-bearing liabilities as of 31 December 2012 are summarised as follows: Ca rryi n g a mo u n t Non -current interest-bearing liabilities Note 18.2 Current interest-bearing liabilities No mi n a l a mo u n t Mea s u remen t u n d er IAS 39 Ma tu ri ty d a te In teres t p a ymen t / rep ri cea b le In teres t ra te p a ya b le (EUR million ) (EUR million ) (b ) Effecti ve interest rate Unsubordinated debentures Floating rate borrowings JPY (a) Amortized cost Dec-26 Semi-annually 0.14% 0.14% Fixed rate borrowings EUR Amortized cost Nov-16 Annually 4.38% 4.50% EUR Amortized cost Nov-16 Annually 4.38% 7.16% EUR Amortized cost Feb-18 Annually 3.88% 4.05% 1,425 1,45 0 JPY (a) Amortized cost Nov-15 Annually 6.18% 6.18% JPY (a) Amortized cost Dec-15 Annually 6.21% 6.21% Total unsubordinated debentures 1,672 1,667 Leasing and similar obligations EUR 2 2 Amortized cost 2016 Quarterly 4.72% 4.72% 2 2 Total non -current financial liabilities (derivatives excluded ) 1,674 1,670 D eri va ti ves Derivatives held-for-trading (c) 87 0 Fair value To ta l 1,76 1 1,6 70 Current portion of interest-bearing -liabilities > 1 year Unsubordinated debentures Fixed rate borrowings EUR Amortized cost Dec-13 Annually 6.00% 6.11% Leasing and similar obligations Fixed rate borrowings EUR 2 2 Amortized cost 2016 Quarterly 4.72% 4.72% Credit institutions Fixed rate borrowings EUR 4 4 Amortized cost Nov-13 Semi-annually 3.78% 3.78% To ta l (a) converted into a loan in EUR via currency interest rate swap (b) for floating rate borrowings, interest rate is the one prevailing at the last repricing date before 31 December 2012 (c) Economic hedges of JPY borrowings As o f 31 D ecemb er (EUR mi lli o n ) Current portion of amounts payable > 1 year Unsubordinated debentures Leasing and similar obligations 2 2 Credit institutions 4 0 Other financial debts Other loans To ta l

137 Note 19. Provisions (EUR mi lli o n ) Wo rkers ' a cci d en ts Li ti g a ti o n Illn es s d a ys Other Ob li g a ti o n s To ta l As o f 1 Ja n u a ry Additions Utilisations Withdrawals Unwinding and change in discount rate As o f 31 D ecemb er Additions Utilisations Withdrawals Unwinding As o f 31 D ecemb er The provision for workers accidents relates to compensation that Belgacom SA could pay to members of personnel injured (including professional illness) when performing their job and on their way to work. Until 31 December 2002, according to the law of 1967 (public sector) on labor accidents, compensation was funded and paid directly by Belgacom. This provision (annuities part) is based on actuarial data including mortality tables, compensation ratios, interest rates and other factors defined by the law of 1967 and calculated with the support of a professional insurer. Taking into account the mortality table, it is expected that most of these costs will be paid out until As from 1 January 2003, contractual employees are subject to the law of 1971 (private sector) and statutory employees remain subject to the law of 1967 (public sector). For both the contractual and statutory employees, Belgacom is covered as from 1 January 2003 by insurance policies for workers accidents and therefore will not directly pay members of personnel. The provision for litigation represents management s best estimate for probable losses due to pending litigation where the Group has been sued by a third party or is subject to a judicial or tax dispute. The expected timing of the related cash outflows depends on the progress and duration of the underlying judicial procedures. The provision for illness days represents management s best estimate of probable charges related to the granting by Belgacom of accumulating non-vesting illness days to its statutory employees. The provision has been determined based on statistical data. The provision for other obligations mainly include the expected costs for dismantling and restoration of mobile antenna sites and sites where payphones are installed, environmental risks and sundry risks. It is expected that most of these costs will be paid during the period The provision for restoration costs is estimated at current prices and discounted using a discount rate that varies between 0% and 4%, depending the expected timing to settle the obligation. Note 20. Other non-current payables As o f 31 D ecemb er (EUR millio n) No te Other derivatives Other amounts payable To ta l In December 2013, Belgacom acquired a license for the 800 Mhz spectrum for an amount of EUR 120 million payable by installments over a 20 years period. The related amount that will be settled after more than twelve months (Eur 107 million) is included in other non current payables. The fair value of this amount approximates its nominal value. 66

138 Note 21. Other current payables As o f 31 D ecemb er (EUR millio n ) No te VAT payables Payables to employees Accrual for holiday pay Accrual for social security contributions Advances received on contracts Other taxes Deferred income Other derivatives Accrued expenses Other debts To ta l Deferred income mainly includes prepaid telecommunication and ICT services. Other debts mainly relate to amounts collected on behalf of third parties and the annual installment of the 800 Mhz license that will be paid in 2014 (EUR 6 million). Note 22. Net revenue Yea r end ed 31 D ecemb er (EUR mi lli o n) Sales of goods Rendering of services 5,789 5,596 To ta l 6,415 6,239 As a consequence of the new Belgian Telecom law in force as from October 1, 2012 criteria allowing deferral in time of discounts on Proximus mobile contracts were no longer met. Therefore the accumulated deferred discounts (EUR 12 million) were reversed in reduction of revenue in Note 23. Other operating income Yea r end ed 31 D ecemb er (EUR mi lli o n) Gain on disposal of intangible assets and property, plant and equipment 5 33 Miscellaneous reinvoicing and recovery of expenditures Other income To ta l Other income includes compensation for network damages as well as employee and third party contributions for sundry services and capital gains on sale of technical buildings in the framework of the network simplification program. 67

139 Note 24. Non-recurring income Gains on the disposal of subsidiaries and joint-ventures are reported as non-recurring income when they individually exceed EUR 5 million. There was no non-recurring income in 2012 and Note 25. Costs of materials and services related to revenue Yea r end ed 31 D ecemb er (EUR mi lli o n) Purchases of materials Purchases of services 2,173 2,120 To ta l 2,611 2,561 Purchases of materials are shown net of work performed by the enterprise that is capitalized for an amount of EUR 83 million in 2013 and EUR 103 million in As a consequence of the new Belgian Telecom law in force as from October 1, 2012 criteria allowing deferral in time of sales commissions for Proximus mobile contracts were no longer met. Therefore the accumulated deferred commissions (EUR 22 million) were reversed into cost of materials and services related to revenues in Note 26. Personnel expenses and pensions Yea r en d ed 31 D ecemb er (EUR mi lli o n ) res ta ted Salaries and wages Social security expenses Pension costs Post-employment benefits other than pensions and termination benefits 2 8 Other personnel expenses To ta l 1,126 1,142 Salaries and wages and social security expenses are shown net of work performed by the enterprise that is capitalized for an amount of EUR 89 million in 2013 and EUR 78 million in Note 27. Other operating expenses Yea r en d ed 31 D ecemb er (EUR mi lli o n ) Rent expense Maintenance and utilities Advertising and public relations Consultancy Administration and training Telecommunications, postage costs and office equipment Outsourcing Allowances for trade debtors 9-8 Loss on realization of trade debtors Impairment on intangible assets and property, 4 1 Taxes other than income taxes Other operating charges (1) To ta l (1) Including unrealized and realized net exchange losses amounting to EUR 2 million in 2012 and none in 2013 The operating expenses are shown net of work performed by the enterprise that is capitalized for an amount of EUR 174 million in 2013 and EUR 155 million in

140 Note 28. Non-recurring expenses Yea r end ed 31 D ecemb er (EUR mi lli o n) res ta ted Impairment loss on disposal group classified as held for sale 0 17 Termination benefits and additional compensation 15-2 Settlements of Post employment benefits 0-1 To ta l Losses on the disposal of subsidiaries and joint-ventures that individually exceed EUR 5 million, costs of restructuring programs, the effect of settlements of post-employment benefit plans are recognized as non-recurring expenses. In 2012 and 2013 the Group reviewed the estimation of the liability for termination benefits resulting in a non-recurring expense of respectively EUR 15 million in 2012 and EUR -2 million in (see note 9.1) In 2013 the group recognized an impairment loss on reclassification of a disposal group as held for sale for EUR 17 million. Note 29. Depreciation and amortization Yea r end ed 31 D ecemb er (EUR mi lli o n) Amortization of licenses and other intangible assets Depreciation of property, plant and equipment To ta l The useful life for modems and decoders was increased from 24 to 36 months. This had a positive impact on depreciation expenses of EUR 9 million. Note 30. Net finance income / (costs) Yea r en d ed 31 D ecemb er (EUR mi lli o n ) res ta ted Finance income Interest income on financial instruments At amortized cost 2 2 At fair value through income statement 2 0 Interest income on assets On receivables 2 2 Gain on disposal of Associates 1 0 Fair value adjustments of financial instruments Not in a hedge relationship 7 11 Other finance income 2 2 Finance costs Interests and debt charges on financial instruments At amortized cost At fair value through income statement On provisions -4-4 On termination benefits On long term payables -1-1 Impairment losses On other participating interests Fair value adjustments of financial instruments Not in a hedge relationship -1 0 Other finance costs -4-4 To ta l

141 Note 31. Earnings per share Basic earnings per share are calculated by dividing the net income for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the net income for the year attributable to ordinary shareholders, by the weighted average number of ordinary shares outstanding during the year, both adjusted for the effects of dilutive potential ordinary shares. The following table reflects the income and share data used in the computation of basic and diluted earnings per share. Yea r en d ed 31 D ecemb er (i n mi lli o n s, excep t p er s ha re a mo u n ts ) res ta ted Net income attributable to ordinary shareholders (EUR million) Adjusted net income for calculating diluted earnings per share (EUR million) Weighted average number of outstanding ordinary shares 318,011, ,759,360 Adjustment for share options 677, ,352 Weighted average number of outstanding ordinary shares for diluted earnings per share 318,688, ,987,711 Basic earnings per share (EUR) Diluted earnings per share (EUR) The stock options granted in 2004, 2007, 2008, 2010, 2011 and 2012 are anti-dilutive and hence not included in the calculation of diluted earnings per shares, while the other options granted are dilutive. Note 32. Dividends paid and proposed (i n mi lli o n s, excep t p er s ha re a mo u n ts ) Dividends on ordinary shares: Proposed dividends (EUR million) Number of outstanding shares with dividend rights 318,321, ,204,181 Dividend per share (EUR) Interim dividend paid to the shareholders (EUR million) Interim dividend per share (EUR) The proposed dividends for 2012 have been effectively paid in April The interim dividend of 2012 was a combination of normal interim dividend (EUR 0.50 gross per share) and a one-time extra interim dividend (of EUR 0.31 per share) since Belgacom opted for an extra dividend instead of returning the EUR 100 million outstanding as a share buyback. The interim dividends for 2013 have been paid in December An amount of EUR 6 million was paid in 2013 at the time of exercise of stock options and corresponds to the accumulated dividends attached to the SOP since their granting. 70

142 Note 33. Additional disclosures on financial instruments Note Derivatives The Group makes use of derivatives such as interest rate swaps (IRS), interest rate and currency swaps (IRCS), forward foreign exchange contracts and currency options. (EUR mi lli o n ) No te Non-current assets Other derivatives - interest related Current assets Other derivatives To ta l a s s ets Non-current liabilities Other derivatives - interest related Derivatives held-for-hedging - non-interest-bearing liabilities Current liabilities Derivatives held-for-hedging - non-interest-bearing liabilities 0 2 Other derivatives To ta l li a b i li ti es The tables below show the positive and negative fair value of derivatives, included in the balance sheet respectively as current/non-current assets or liabilities, together with the notional amounts presented by the term of maturity. As of 31 December 2013 Fair value Notional amount (1) (EUR million ) Within over 5 Total As s et Liability 2 months months years years Commodity swap Derivatives qualifying as cas h flow hedges Interest rate swaps Interest rate and currency swaps Interests and currency related - other derivates Forward foreign exchange contracts Derivatives not qualifying as hedges (1) To ta l (1) The sign "+" refers to notional amounts to be cashed in and the sign "-" to notional amounts to be cashed out. As of 31 December 2012 Fair value Notional amount (1) (EUR million ) Within over 5 Total As s et Liability 2 months months years years Commodity swap Derivatives qualifying as cas h flow hedges Interest rate swaps Interest rate and currency swaps Interests and currency related - other derivates Forward foreign exchange contracts Derivatives not qualifying as hedges (1) To ta l (1) The sign "+" refers to notional amounts to be cashed in and the sign "-" to notional amounts to be cashed out. 71

143 Note 33.2 Financial risk management objectives and policies The Group s main financial instruments comprise unsubordinated debentures, trade receivables and trade payables. The main risks arising from the Group s use of financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk. The Group is also exposed to financial risks associated with forecasted transactions. All financial activities are subject to the principle of risk minimization. To achieve this, all matters related to funding, foreign exchange, interest rate and counterparty risk management are handled by a centralized Group Treasury department. Simulations are performed using different market (including worst case) scenarios with a view to estimating the effects of varying market conditions. All financial transactions and financial risk positions are managed and monitored in a centralized treasury management system. Group Treasury operations are conducted within a framework of policies and guidelines approved by the Board of Directors. Group Treasury is responsible for implementing these policies. According to the policies, derivatives are used to hedge interest rate and currency exposures. Derivatives are used exclusively as hedging instruments, i.e., not for trading or other speculative purposes. Derivatives used by the Group mainly include forward exchange contracts, interest rate swaps, interest rate and currency swaps and future rate agreements (FRA s). The Group s internal auditors regularly review the internal control environment at Group Treasury. No material changes occurred during the period in the nature of the exposure of the Group to financial risks nor in the Group s policies and processes for managing financial risk. Interest rate risk The Group s exposure to changing market interest rates primarily relates to its long-term financial obligations. Group Treasury manages exposure of the Group to changes in interest rates and the overall cost of financing by using a mix of fixed and variable rate debts, in accordance with the Group s financial risk management policies. The aim of such policies is to achieve an optimal balance between total cost of funding, risk minimization and avoidance of volatility in financial results, whilst taking into account market conditions and opportunities as well as overall business strategy. Accordingly, the company entered into several interest rate swaps (IRS) and interest rate and currency swaps (IRCS) to transform the interest rate exposure on certain financial liabilities from a fixed interest rate to a floating interest rate mechanism or vice versa. These IRS and IRCS derivatives are economic hedges and do not qualify for hedge accounting. The tables below summarize the non-current interest-bearing liabilities (including their current portions, excluding leasing and similar obligations), the interest rate and currency swap agreements (IRCS), the interest rate swap agreements (IRS) and the net currency obligations of the Group at 31 December 2012 and As of 31 December 2013 Direct borrowing IRCS agreements IRS agreements Net currency obligations Notional amount Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) Average time to maturity (EUR million ) (in years ) (EUR million ) (in years ) (EUR million ) (in years ) (EUR million ) (in years ) EUR Fixed 1, % % 2 1, % 4 Variable % % % 13 JPY Fixed % % 6 0 To ta l 1, % , % 5 (1) Weighted average interest rate taking into account last repriced interest rates for floating borrowings. Notional amount Direct borrowing IRCS agreements IRS agreements Net currency obligations Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) The Group expects immaterial impacts for 2014 on the income statement resulting from interest payable on floating rate borrowings on the one hand and from measurement at fair value in income statement of some IRS derivatives that do not qualify as hedging instruments on the other hand. Average time to maturity (EUR million ) (in years ) (EUR million ) (in years ) (EUR million ) (in years ) (EUR million ) (in years ) EUR Fixed 1, % % 3 1, % 4 Variable % % % 14 JPY Fixed % % 7 0 To ta l 1, % , % 4 (1) Weighted average interest rate taking into account last repriced interest rates for floating borrowings. As of 31 December

144 Foreign currency risk The Group s main currency exposures result from its operating activities. Such exposure arises from sales or purchases by operating units in currencies other than their respective functional currency. Transactions in currencies other than the functional currency mainly occur in the International Carrier Services ( ICS ) segment whose international carrier activities generate payments to and receipts from other telecommunications operators in various foreign currencies, as well as in some affiliates of the Telindus subgroup running USD denominated operating activities and finally also, in relationship with international activities (roaming, capital and operating expenditure) of the Group. Risks from foreign currencies are hedged to the extent that they are liable to influence the Group s cash flows. Foreign currency risks that do not influence the Group s cash flows (i.e., the risks resulting from the translation of assets and liabilities of foreign operations into the Group s reporting currency) as a rule are not hedged. However, the Group could envisage hedging such so-called translation differences should their potential impact become material to the Group s consolidated financial statements. The typical financial instruments used to hedge foreign currency risk are forward foreign exchange contracts and currency options. In 2012 and 2013, the Group only incurred currency exposures relative to its operating activities. Re-measurement to fair value of underlying open trade positions in foreign currencies as a rule is recorded via the income statement and reduced or offset by the accompanying re-measurement to fair value of derivatives used to hedge such underlying exposures. In a limited number of cases however, hedge accounting has been applied, whereby such re-measurement results are temporarily being recorded on the balance sheet, awaiting final occurrence and settlement of underlying, so-called hedge effective, exposures, when the foreign exchange results ultimately are included in the income statement. The Group performed a sensitivity analysis on the exchange rates EUR/USD, EUR/SDR 20 EUR/GBP, and EUR/CHF, four currency pairs to which it is typically exposed in its operating activities, for the years 2012 and For 2012 and 2013, there was no material impact on the Group s income statement. For 2014, the Group does not expect any material impact of currency fluctuations on its overall financial performance either. This results from timely and adequately hedging such exposures as they surface in the course of business. Credit risk and significant concentrations of credit risk Belgacom is exposed to credit risk from its operating activities and from its financing activities (financial investments done to manage cash of the Group). Credit risk encompasses all forms of counterparty exposure, i.e. where counterparties may default on their obligations to Belgacom in relation to lending, hedging, settlement and other financial activities. The Group s maximum exposure to credit risk (not taking into account the value of any collateral or other security held) in the event the counterparties fail to perform their obligations in relation to each class of recognized financial assets, including derivatives with positive market value, is the carrying amount of those assets in the balance sheet and bank guarantees granted. To reduce the credit risk in respect of financing activities and cash management of the Group, transactions as a rule are only entered into with leading financial institutions whose long term credit ratings equal at least A- (S&P). Credit risk on operating activities with significant clients is managed and controlled on an individualized basis. When needed, the Group requests additional collaterals. These significant customers are however not material to the Group, since the client portfolio of the Group is mainly composed of a large number of small customers. Hence, credit risk and concentration of credit risk on trade receivables is limited. For amounts receivable from other telecommunication companies, the concentration of credit risk is also limited due to netting agreements with accounts payable to these companies, prepayment obligations, bank guarantees, parent guarantees and the use of credit limits obtained via credit insurance. The Group is exposed to credit loss in the event of non-performance by a counterparty on financial derivatives (see note 33.1). However, the Group does not anticipate non-performance by any of these counterparties, seeing it only deals with prime financial institutions. In addition, the Group is exposed to credit risk by occasionally granting financial guarantees. At 31 December 2013, it had granted bank guarantees for an amount of EUR 46 million (and EUR 43 million at 31 December 2012). Liquidity risk In accordance with the treasury policy, Group Treasury manages its overall cost of financing by using a mix of fixed and variable rate debts. A liquidity reserve in the form of credit lines and cash is maintained to guarantee the solvency and financial flexibility of the Group at all times. For this purpose, Belgacom SA entered into bilateral credit agreements with different maturities and into two separate Syndicated Revolving Facilities. For medium to long-term funding, the Group uses bonds and medium term notes. The maturity profile of the debt portfolio is spread over several years. Group Treasury frequently assesses its funding resources taking into account its own credit rating and general market conditions. 20 SDR: Special Drawing Rights: basket of currencies, transactional money used in netting agreements between telecom operators 73

145 The table below summarizes the maturity profile of the Group s unsubordinated debentures as disclosed on note 18 at each reporting date. This maturity profile is based on contractual undiscounted interests payments and capital reimbursements and takes into account the impact on cash flows of interest rate derivatives used to convert fixed interest rate liabilities into floating interest rate liabilities and vice versa. For floating rate liabilities, interest rates used to determine cash outflows are the ones prevailing at their last price fixing date before reporting date (as of 31 December 2012 and 2013, respectively). (EUR millio n ) As o f 31 D ecemb er 2012 Capital Interests Total , As o f 31 D ecemb er 2013 Capital Interests Total , Bank credit facilities at 31 December 2013 In addition to the interest-bearing liabilities disclosed in notes 18.1 and 18.2, the Group is backed by long term credit facilities of EUR 550 million and short term credit facilities of EUR 310 million. These facilities are provided by a diversified group of banks. As at 31 December 2013, there were no outstanding balances under any of these facilities. A total of some EUR 860 million of credit lines was therefore available for drawdown as at 31 December The Group has also established a EUR 2.5 billion Euro Medium Term Note ( EMTN ) Program and a EUR 1 billion Commercial Paper ( CP ) Program. As at 31 December 2013, there was an outstanding balance under the EMTN Program of EUR 1,700 million and EUR 313 million under the CP Program. Note 33.3 Net financial position of the Group and capital management The Group defines the net financial position as the net amount of investments, cash and cash equivalents minus any interest-bearing liabilities and related derivatives (including re-measurement to fair value). The net financial position does not include vendor financing. The outstanding amount from the deferred payment arrangement for the 800 Mhz license, which is classified as other current/non current payables, amounts to EUR 114 million per end 2013 (EUR mi lli o n ) No te As s ets Current investments (1) Cash and cash equivalents (1) Non-current derivatives Li a b i li ti es Non-current interest-bearing liabilities (1) 18-1,761-1,950 Current interest-bearing liabilities (1) Net fi n a n ci a l p o s i ti o n -1,6 01-1,815 (1) after remeasurement to fair value, if applicable. Non-current interest-bearing liabilities include non-current derivatives at fair value amounting to EUR 87 million in 2012 and EUR 28 million in 2013 (see note 18.1). The purpose of the Group s capital management is to maintain net financial debt and equity ratios that allow for security of liquidity at all times via flexible access to capital markets, in order to be able to finance strategic projects and to offer an attractive remuneration to shareholders. The latter was updated by the Belgacom Board of Directors of 25 February 2010 and Belgacom now commits to return, in principle, most of its annual cash flow before financing activities (or Free Cash Flow ), to its shareholders. The return of free cash flow either through dividends or share buybacks will be reviewed on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective merger and acquisition projects, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves. Over the two years presented, the Group did not issue new shares or any other dilutive instruments. 74

146 Note 33.4 Categories of financial instruments The Group has interest rate and currency swaps (IRCS) to manage the exposure to interest rate risk and to foreign currency risk on its non-current interest bearing liabilities (see note 33.2). The following tables present the Group s financial instruments per category defined under IAS 39, as well as gains and losses resulting from re-measurement to fair value. Based on market conditions at 31 December 2013, the fair value of the unsubordinated debentures, which are accounted for at amortized cost, exceeds by EUR 179 million, or 9%, their carrying amount. The Group does not intend to reimburse these loans before their maturity. The fair values, calculated for each debenture separately, were obtained by discounting the cumulated cash outflows generated by each debenture with the interest rates at which the Group could borrow at 31 December 2013 for similar debentures with the same remaining maturities. As of 31 December 2013 (EUR million ) No te Ca teg o ry a cco rd i n g to IAS 39 (1) Ca rryi n g a mo u n t Amounts recognized in balance sheet according to IAS 39 Amo rti zed co s t Acq u i s i ti o n co s t n et o f i mp a i rmen t losses, if any Fa i r va lu e a d ju s tmen t reco g n i zed i n eq u i ty Fa i r va lu e a d ju s tmen t reco g n i zed i n i n co me s ta temen t ASSETS Non -current assets Other participating interests 7 AFS Other non-current assets Other derivatives 33.1 FVTPL Other financial assets 10 LaR Current assets Trade receivables 12 LaR 1,289 1,289 Other current assets VAT and other receivables 13 N/A Other derivatives 33.1 FVTPL 1 1 Investments 14 AFS Investments 14 HTM Cash and cash equivalents Fixed income securities 14 HTM Short-term deposits 14 LaR LIAB ILITIES Non -current liabilities Interest-bearing liabilities Unsubordinated debentures not in a hedge relationship 18 OFL 1,919 1,919 Leasing and similar obligations 18 OFL 2 2 Other derivatives 33.1 FVTPL Non interest-bearing liabilities Derivatives held-for-hedging 33.1 HeAc 3 3 Other non-current payables 20 OFL Current liabilities Interest-bearing liabilities, current portion Leasing and similar obligations 18 OFL 2 2 Interest-bearing liabilities Other loans 18 OFL Trade payables OFL 1,320 1,320 Other current payables Derivatives held-for-hedging 33.1 HeAc Other derivatives 33.1 FVTPL 2 2 V.A.T. and other amounts payable 21 N/A (1) The categories according to IAS 39 are the following : AFS: Available-for-sale financial assets HTM: Financial assets held-to-maturity LaR: Loans and Receivables financial assets FVTPL: Financial assets/liabilities at fair value through profit and loss OFL: Other financial liabilities Hedge activity HeAc: Hedge accounting 75

147 As of 31 December 2012 (EUR million ) No te Ca teg o ry a cco rd i n g to IAS 39 (1) Ca rryi n g a mo u n t Amounts recognized in balance sheet according to IAS 39 Amo rti zed co s t Acq u i s i ti o n co s t n et o f i mp a i rmen t losses, if any Fa i r va lu e a d ju s tmen t reco g n i zed i n eq u i ty Fa i r va lu e a d ju s tmen t reco g n i zed i n i n co me s ta temen t ASSETS Non -current assets Other participating interests 7 AFS Other non-current assets Other derivatives 33.1 FVTPL Other financial assets 10 LaR Current assets Trade receivables 12 LaR 1,341 1,341 Other current assets VAT and other receivables 13 N/A Investments 14 AFS Investments 14 HTM Cash and cash equivalents Fixed income securities 15 HTM Short-term deposits 15 LaR LIAB ILITIES Non -current liabilities Interest-bearing liabilities Unsubordinated debentures not in a hedge relationship 18 OFL 1,672 1,672 Leasing and similar obligations 18 OFL 2 2 Other derivatives 33.1 FVTPL Non interest-bearing liabilities Other non-current payables 20 OFL 1 1 Current liabilities Interest-bearing liabilities, current portion Unsubordinated debentures not in a hedge relationship 18 OFL Leasing and similar obligations 18 OFL 2 2 Credit institutions 18 OFL 4 4 Interest-bearing liabilities Other loans 18 OFL Trade payables OFL 1,310 1,310 Other current payables Other derivatives 33.1 FVTPL 1 1 V.A.T. and other amounts payable 21 N/A (1) The categories according to IAS 39 are the following : AFS: Available-for-sale financial assets HTM: Financial assets held-to-maturity LaR: Loans and Receivables financial assets FVTPL: Financial assets/liabilities at fair value through profit and loss OFL: Other financial liabilities Hedge activity HeAc: Hedge accounting Note 33.5 Assets and liabilities measured at fair value The Group held as at 31 December 2013 financial instruments measured at fair value. Those instruments are disclosed in the table below according to the valuation technique used. The hierarchy between the techniques reflects the significance of the inputs used in making the measurements: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2: valuation techniques for which all inputs which have a significant effect on the recorded fair value are observable for the asset or liability, either directly or indirectly; Level 3: valuation techniques for which all inputs which have a significant effect on the recorded fair value are not based on observable market data. The Group holds financial instruments classified in Level 1 or 2 only. The valuation techniques for fair value measuring the Level 2 financial instruments are: Other derivatives in Level 2 Other derivatives include mainly the interest rate swaps (IRS) and interest rate and currency swaps (IRCS) the Group entered into to reduce the interest rate and currency fluctuations on some of its long-term debentures. The fair values of these instruments are determined by discounting the expected contractual cash flows using interest rate curves in the corresponding currencies and currency exchange rates, all observable on active markets. Unsubordinated debentures The unsubordinated debentures not in a hedge relationship are recognized at amortized costs. Their fair values, calculated for each debenture separately, were obtained by discounting the interest rates at which the Group could borrow at 31 December 2013 for similar debentures with the same remaining maturities. 76

148 (EUR millio n ) ASSETS No te Level 1 Level 2 Level 3 No n -cu rren t a s s ets Other non-current assets Other derivatives 33.1 FVTPL Cu rren t a s s ets Other current assets Other derivatives 33.1 FVTPL 1 1 Investments 14 AFS LIAB ILITIES No n -current lia bilities Interest-bearing liabilities Unsubordinated debentures not in a hedge relationship (2) 33.1 OFL 1,919 2,093 Other derivatives 33.1 FVTPL Non interest-bearing liabilities Derivatives held-for-hedging 33.1 HeAc 3 3 Current lia bilities Ca teg o ry a cco rd i n g to IAS 39 (1) B a la n ce a t 31 D ecemb er 2013 Non interest-bearing liabilities Derivatives held-for-hedging 33.1 HeAc 2 2 Other derivatives 33.1 FVTPL 2 2 (1) The categories according to IAS 39 are the following : AFS: Available-for-sale financial assets FVTPL: Financial assets/liabilities at fair value through profit and loss (2) The debentures fair values are net of the attached embedded derivatives fair values, which are included in the non-current other derivatives. Fa i r va lu es mea s u remen t a t en d o f the rep o rti n g p eri o d u s i n g : (EUR millio n ) ASSETS No te Level 1 Level 2 Level 3 No n -cu rren t a s s ets Other non-current assets Other derivatives 33.1 FVTPL Cu rren t a s s ets Other current assets Investments 14 AFS LIAB ILITIES Ca teg o ry a cco rd i n g to IAS 39 (1) B a la n ce a t 31 D ecemb er 2012 No n -current lia bilities Interest-bearing liabilities Unsubordinated debentures not in a hedge relationship (2) 33.1 OFL 1,672 1,869 Other derivatives 33.1 FVTPL Current lia bilities Interest-bearing liabilities Unsubordinated debentures not in a hedge relationship 33.1 OFL Credit institutions 33.1 OFL 4 4 Non interest-bearing liabilities Other derivatives 33.1 FVTPL 1 1 (1) The categories according to IAS 39 are the following : AFS: Available-for-sale financial assets FVTPL: Financial assets/liabilities at fair value through profit and loss (2) The debentures fair values are net of the attached embedded derivatives fair values, which are included in the non-current other derivatives. Fa i r va lu es mea s u remen t a t en d o f the rep o rti n g p eri o d u s i n g : 77

149 Note 34. Related party disclosures Note Consolidated companies Subsidiaries, joint-ventures and associates are listed in note 6. Commercial terms and market prices apply for the supply of goods and services between Group companies. The transactions between Belgacom SA and its subsidiaries, being related parties, are eliminated for the preparation of the consolidated financial statements. The transactions between Belgacom SA and its subsidiairies are as follows: B elg a co m SA tra n s a cti o n s wi th i ts s u b s i d i a i ri es Yea r en d ed 31 D ecemb er (EUR mi lli o n ) Revenues Costs of materials and services related to revenue Net finance costs Dividends received Ou ts ta n d i n g b a la n ces o f B elg a co m SA wi th s u b s i d i a ri es As o f 31 D ecemb er (EUR mi lli o n ) Trade receivables Trade payables Interest bearing receivables/liabilities -10,260-10,532 Other receivables and liabilities Associates ClearMedia SA In 2010, the Group acquired 40% of ClearMedia SA but the Group had no significant transactions with this minority participation in 2012 and Joint ventures Belgacom Mobile Wallet SA In November 2013 Belgacom and BNP Paribas Fortis set up Belgacom Mobile Wallet SA a joint venture to support online and mobile trade in Belgium. The company is expected to start its operational activities in Note Relationship with shareholders and other State-controlled entreprises. The Belgian State is the majority shareholder of the Group, with a stake of 53.51%. The Group holds treasury shares for 5.83%. The remaining 40.66% are traded on the First Market of Euronext Brussels. Relationship with the Belgian State The Group supplies telecommunication services to the Belgian State and State-related entities. State related enterprises are those that are either State-controlled or State-jointly-controlled or State-influenced. All such transactions are made within normal customer/supplier relationships on terms and conditions that are not more favorable than those available to other customers and suppliers. The services provided to State-related enterprises do not represent a significant component of the Group s net revenue, meaning less than 5%. 78

150 Note Relationship with key management personnel The remuneration and compensation of the Directors was decided by the General Shareholders Meeting of The principles of this compensation did not change in 2013: it foresees an annual fixed compensation of EUR for the Chairman of the Board of Directors and of EUR for the other members of the Board of Directors, with the exception of the President & CEO. All members of the Board of Directors, with the exception of the President & CEO, have the right to an attendance fee of EUR per attended meeting of the Board of Directors. This fee is doubled for the Chairman. Attendance fees of EUR are foreseen for each member of an advisory committee of the Board of Directors, with the exception of the President & CEO. For the Chairman of the respective advisory committee these attendance fees are doubled. The members also receive EUR per year for communication costs. For the Chairman of the Board of Directors the communication costs are also doubled. The Chairman of the Board of Directors is also Chairman of the Joint Committee and of the Pension Fund. Mrs. Martine Durez and Mr. Theo Dilissen are members of the Board of the Pension Fund. They do not receive any fees for these participations. For the execution of their Board mandates, the Directors do not receive performance-based remuneration such as bonuses or long-term incentive programs, nor do they receive benefits linked to pension plans. The total remuneration for the directors amounts to EUR 1,140,250 for 2013 and EUR 1,118,000 for 2012 The directors have not received any loan or advance from the Group. The number of meetings of the Board of Directors and advising committees are detailed as follows: Board of Directors 8 8 Audit and Compliance Committee 5 8 Nomination and Remuneration Committee 7 6 Strategic and Business Development Committee 2 3 In its meeting of 24 February 2011, the Board adopted a related party transactions policy which governs all transactions or other contractual relationships between the company and its board members. Belgacom has contractual relationships and is also a vendor for telephony, Internet and/or ICT services for many of the companies in which Board members have an executive or non-executive mandate. Belgacom is also a Partner of Guberna, the Belgian Institute for Directors (affiliated with Ms. Lutgart Van den Berghe who is Executive Director of Guberna), for which it has paid a fee of 30,250 in For the year ended 31 December 2012, a total amount of EUR 9,373,347 (social security costs of EUR 1,694,708 and sharebased payments included, as well as long term share-based payments) was paid or granted in aggregate to the members of the Belgacom Management Committee (BMC), Chief Executive Officer included. In 2012, the members of the Belgacom Management Committee were D. Bellens, S. Alcott (6 months), B. Chauvat, M. Georgis, D. Leroy (7 months), G. Standaert (10 months), R. Stewart, and B. Van Den Meersche. For the year ended 31 December 2013, a total amount of EUR 9,762,050 (social security costs of EUR 2,039,278 and sharebased payments included, as well as long term performance value based payments) was paid or granted in aggregate to the members of the Belgacom Management Committee (BMC), Chief Executive Officer included. In 2013, the members of the Belgacom Management Committee were D. Bellens (10,5 months), B. Chauvat (12 months), M. Georgis, D. Leroy, G. Standaert, R. Stewart, and B. Van Den Meersche. These total amounts of key management compensation include the following components: Short-term employee benefits: annual salary (base and short-term variable) as well as other short-term employee benefits such as medical insurance, private use of management cars, meal vouchers, and including employer social security contributions paid on these benefits; Post-employment benefits: insurance premiums paid by the Group in the name of members of the BMC. The premiums cover mainly a post-retirement complementary pension plan; Share-based payments: Cost of the discount of 16.66% compared to the market price in Discounted Share Purchase Plan and, only for 2012, also the fair value of stock options (that is expensed over the vesting period in accordance with the graded vesting method); Performance Value based payments (long term): gross amounts, granted under Performance Value, which create possible exercising rights as from May 2016, depending on the achievement of market conditions based on Belgacom s Total Shareholder Return compared to a predefined group of other European telecom operators. Possible exercising will happen in cash, which implies that employer social contributions have been taken into account. Only as from 2013 as replacing the former Stock Options Plan; Termination benefits: paid or accrued 79

151 Yea r en d ed 31 D ecemb er EUR Short-term employee benefits 6,921,826 6,700,283 Post-employment benefits 710, ,392 Share- based payments 1,740,981 2,133,375 To ta l 9,373,347 9,76 2,05 0 Yea r en d ed 31 D ecemb er Shares (Discounted Share Purchase Plan) 138, ,935 Options (Stock Option Plan) 310,924 0 Note Regulations The telecommunications sector is regulated through the legislation adopted in the Belgian parliament, through a series of Royal and Ministerial Decrees, and also through decisions of the Belgian Institute for Postal services and Telecommunications, commonly referred to as the BIPT/IBPT. The Belgian licensing regime provides for individual licenses for the provision of public fixed voice telephony services, public network infrastructure services and mobile telecommunications services. The company is also governed by certain provisions and principles of Belgian public and administrative law whereby Belgacom has obligations such as the delivery of regulated services and public services. Note 35. Rights, commitments and contingent liabilities Operating lease commitments The Group rents sites for its telecom infrastructure and leases buildings, technical and network equipment, as well as furniture and vehicles under operating leases with terms of one year or more. Rental expenses in respect of these operating leases amounted EUR 124 million in 2013 and EUR 127 million in Future minimum rentals payable under the non-cancellable operating leases are as follows at 31 December 2013: Wi thi n o n e Fro m 1 to 3 Fro m 3 to 5 Mo re tha n 5 (EUR mi lli o n ) yea r yea rs yea rs yea rs To ta l Buildings Sites Technical and network equipment Vehicles Other material To ta l Future minimum rentals payable under the non-cancellable operating leases are as follows at 31 December 2012: Wi thi n o n e Fro m 1 to 3 Fro m 3 to 5 Mo re tha n 5 (EUR mi lli o n ) yea r yea rs yea rs yea rs To ta l Buildings Sites Technical and network equipment Vehicles Other material To ta l In the scope of its normal activities, the Group rents the equipment for its own use and needs. The Group is therefore not involved in significant sublease contratcs with customers. The rent contracts do not include contingent rent payable or other special features or restrictions. 80

152 Claims and legal proceedings From time to time, Belgacom has been subject to legal, regulatory and tax proceedings and claims arising in the ordinary course of its business. Belgacom is currently involved in various judicial and regulatory proceedings, including those for which a provision has been made and those described below for which no or limited provisions have been accrued, in the jurisdictions in which it operates concerning matters arising in connection with the conduct of its business. These include also proceedings before the Belgian Institute for Postal services and Telecommunications ("BIPT"), appeals against decisions taken by the BIPT, and proceedings with the Belgian tax administrations with respect to real estate withholding taxes and corporate income taxes. 1. After the launch on 1 June 2005 of the Happy Time tariff scheme by Belgacom, Tele2 filed a complaint with the Belgian Competition Authority i) alleging that said tariffs constitute an abuse of dominant position (27 June 2005) and ii) requesting interim measures, i.e. suspension of the Happy Time offer, pending the procedure (5 July 2005). On 1 September 2006, Tele2 s request for interim measures was initially rejected by the President of the Competition Council. Following an appeal by Tele2, the Court of Appeal, on 18 December 2007, annulled the aforementioned decision, arguing amongst other lack of reasoning. However, Tele2 did not ask the President to adopt a new decision on its request for interim measures but (i) initiated on 18 April 2008 a damage claim before the Commercial Court based on an alleged abuse of dominance (the Happy Time plan) (claim for EUR 1 provisional and request for appointment of an expert to compute the precise damage) and (ii) requested the proceedings in front of the Competition Authority on the merits to be dealt with. It is to be noted that given different reorganizations within the KPN Group, KPN Belgium became the claimant in the aforementioned case. On 29 November 2012, two decisions regarding Belgacom's Happy Time offer were adopted. Through a decision on the merits of the case, the Competition Council concluded that there are no grounds for actions against Belgacom for its Happy Time offer. This ruling follows the complaint lodged in 2005 by Tele2 arguing that such tariff amounted to a price squeeze. After having performed four different margin squeeze tests for the period , the Competition Council decided not to follow the Statement of Objections of the College of Competition Prosecutors issued in September 2009 that concluded that Belgacom abused and was still abusing its dominant position. The Competition Council has now indicated that none of the tests that it performed has led to the conclusion that a margin squeeze existed or has existed. The Competition Authority therefore closed the case. On 4th February 2013, KPN lodged an appeal before the Court of Appeal. In the damage claim case before the Commercial Court, based on an alleged abuse of dominance, the Commercial Court issued an interim ruling. It stated that it did not see evidence of an infringement but nevertheless appointed an expert to carry out further verifications on price squeeze and predatory pricing. In the meantime, this expert has refused the task entrusted to him by the Commercial Court so that a new expert should be appointed. 2. Between 12 and 14 October 2010, the Belgian Directorate General of Competition started a dawn raid in Belgacom s offices in Brussels. This investigation concerns allegations by Mobistar and KPN regarding the wholesale DSL services of which Belgacom would have engaged in obstruction practices. This measure is without prejudice to the final outcome of the full investigation. Following the inspection, the Directorate General of Competition is to examine all the relevant elements of the case. Eventually the College of Competition Prosecutors may propose a decision to be adopted by the Competition Council. During this procedure, Belgacom will be in a position to make its views heard. (This procedure may last several years.) During the investigation of October 2010, a large numbers of documents were seized (electronic data such as a full copy of mail boxes and archives and other files). Belgacom and the prosecutor of the Competition authority exchanged extensive views on the way to handle the seized data. Belgacom wanted to be sure that the lawyers legal privilege (LPP) and the confidentiality of in house counsel advices are guaranteed. Moreover, Belgacom sought to prevent the Competition authority from having access to (sensitive) data that were out of scope. Not being able to convince the prosecutor of its position, Belgacom started two proceedings, one before the Brussels Court of Appeal and one before the President of the Competition Council, in order to have the communication of LPP data and data out of scope to the investigation teams suspended. On 5 March 2013, the Court of Appeal issued a positive judgment in this appeal procedure by which it ruled that investigators had no authority to seize documents containing advices of company lawyers and documents that are out of scope and that these documents should be removed/destroyed. To be noted that this is a decision on the procedure in itself and not on the merit of the case. On 14 October 2013, the Competition authority launched a request for cassation against this decision. Belgacom has joined this cassation procedure 3. In June 2003, KPN Group Belgium (operating under the brand name BASE) filed an action for damages against Belgacom (former Belgacom Mobile operating under the brand name Proximus) before the Commercial Court of Brussels, with Mobistar joining this action with an own claim in March KPN and Mobistar claimed that Belgacom had abused its dominant position by applying inappropriately low prices for on-net calls (calls from Proximus to Proximus) with KPN also claiming that Belgacom had applied mobile termination rates (MTR) that were too high. Both operators claimed for compensation. 81

153 On 29 May 2007, an interim decision of the Commercial Court of Brussels found Belgacom to be dominant between 1999 and 2004, rejected several claims and appointed two experts to examine questions related to the allegations concerning price squeeze and anti-competitive network effects, and to assess whether damage was caused, and -if so- to attempt evaluating the damage. On 2 October 2009, these experts filed a (first) preliminary report that concluded to the existence of the alleged competition law infringements and in particular, on the basis of an unprecedented and prospective method, that it could be considered that the alleged impact on Mobistar and KPN Group Belgium of the Proximus on-net tariffs during the years amounted to EUR1.182 million. On 10 December 2010, the two experts filed another (second) preliminary report. Notwithstanding the detailed critical observations that had been submitted to the experts by Belgacom on all aspects of their first report, this second report basically reiterated the findings of the first report, but found the alleged impact amounted to EUR million. According to Belgacom, this second report did not provide any demonstration of the alleged infringements of the competition rules. Belgacom also noted that the vast majority of its observations remained unanswered and that moreover Belgacom s own expert reports were largely disregarded. For this and a number of other reasons, Belgacom introduced on 21 January 2011 a motion with the Commercial Court in respect of the expert panel, requesting their recusal/replacement. Following the dismissal by the Commercial Court on 17 March 2011 of Belgacom s motion, an appeal procedure was initiated by Belgacom. The Court of Appeal decided on 6 March 2012 that the experts indeed committed several errors, refrained systematically from replying appropriately to Belgacom s observations, thus affecting the rights of defence, and failed to respect several other principles governing judicial expert proceedings. The Court consequently decided that the experts had to be replaced and that the judicial expert proceedings should be restarted by new experts. Upon a joint proposal by the parties, the Court of Appeal of Brussels appointed on 1 October 2012 such new experts. Both Mobistar and KPN Group Belgium continue to contest the replacement of the former court experts through actions with the Cour de cassation. These former court experts also started a procedure ("tierce opposition") against the judgment of 6 March 2012 replacing them. On 31 December 2012, the newly appointed court experts informed the Court of Appeal and the Commercial Court of their decision that, for various reasons, they would not pursue their assignment. On 14 October 2013, the Cassation Court rejected the appeal of Mobistar and KPN Group Belgium. Following to this ruling, Mobistar and KPN Group Belgium relaunched the designation procedure, which led to a joint proposal of all the parties to designate two new experts. The latter s still have however to indicate if they accept the mission. In the meantime, Belgacom lodged an appeal against the initial decision of 29 May 2007 of the Commercial Court and this was followed by the filing of cross-appeals against the said judgment by both KPN and Mobistar. The Court will ultimately need to determine (i) whether anti-competitive practices have been committed and whether Belgacom s MTR failed to respect its regulatory obligations, (ii) whether Belgacom is liable for such practices, and (iii) whether damages are to be paid and -if so- the amount of these possible damages. Belgacom will continue to submit at the required stages of the proceedings its detailed observations and criticisms that will cover all aspects of the pending matter. Indeed, this matter does not only involve a debate on the possible damages that would have been caused, but first the existence of the alleged infringements is to be demonstrated. Belgacom continues to contest the claims of both KPN Group Belgium and Mobistar. In October 2009, seven parties (Telenet, KPN Group Belgium (former Base), KPN Belgium Business (Tele 2 Belgium), KPN BV (Sympac), BT, Verizon, Colt Telecom) filed an action against Belgacom Mobile (currently Belgacom and hereinafter indicated as Belgacom) before the Commercial Court of Brussels formulating allegations that are similar to those in the case mentioned above (including Proximus-to-Proximus tariffs constitute an abuse of Belgacom s alleged dominant position in the Belgian market), but for different periods depending on the claimant, in particular, in the 1999 up to now timeframe (claim for EUR 1 provisional and request for appointment of an expert to compute the precise damage). In November 2009 Mobistar filed another similar claim for the period 2004 and beyond. These cases have been postponed for an undefined period. 4. In the proceedings following a complaint by KPN Group Belgium in 2005 with the Belgian Competition Authority the latter confirmed on 26 May 2009 one of the five charges of abuse of dominant position put forward by the Prosecutor on 22 April 2008, i.e. engaging in in a price-squeeze on the professional market. The Belgian Competition Authority considered that the rates for calls between Proximus customers ( on-net rates ) were lower than the rates it charged competitors for routing a call from their own networks to that of Proximus (=termination rates), increased with a number of other costs deemed relevant. All other charges of the Prosecutor were rejected. The Competition Authority also imposed a fine of EUR 66.3 million on Belgacom (former Belgacom Mobile) for abuse of a dominant position during the years 2004 and Belgacom was obliged to pay the fine prior to 30 June 2009 and recognized this charge (net of existing provisions) as a non-recurring expense in the income statement of the second quarter Belgacom filed an appeal against the ruling of the Competition Authority with the Court of Appeal of Brussels, contesting a large number of elements of the ruling: amongst other the fact that the market impact was not examined. Also KPN Group Belgium and Mobistar filed an appeal against said ruling. The parties are exchanging briefs to organize the access to the file. 82

154 5. The Belgian tax authorities notified a foreign subsidiary of the Group in 2007 to be considered as a tax resident of Belgium rather than of Luxembourg and therefore to be subject to Belgian corporate income tax for the year In 2008, the Belgian tax authorities maintained their 2004 assessment and assessed the Belgian corporate income tax for the subsequent years 2005 and Belgacom has strong arguments to ward off the cumulative proposed tax assessment of EUR 69 million (years 2004, 2005 and 2006 together) excluding interests and has started legal proceedings before Court. Since 2003, Belgacom considers some enrolments of real estate tax on telecom equipment as undue and therefore recognizes an asset against the tax authorities in the current tax assets caption for an amount of EUR 120 million at 31 December 2013 (with a related liability of EUR 28 million). Capital expenditure commitments At 31 December 2013, the Group has contracted commitments of EUR 77 million, mainly for the acquisition of intangible assets and technical and network equipment. Other rights and commitments At 31 December 2013, the Group has the following other rights and commitments: The Group received guarantees for EUR 9 million from its customers to guarantee the payment of its trade receivables and guarantees for EUR 9 million from its suppliers to ensure the completion of contracts or works ordered by the Group; The Group granted guarantees for an amount of EUR 52 million (including the bank guarantees mentioned in note 33.2) to its customers and other third parties to guarantee, among others, the completion of contracts and works ordered by its clients and the payment of rental expenses related to buildings and sites for antennas installation; Belgacom has a right, established by Belgian legislation with respect to Universal Services, to receive a compensation for offering Social Tariffs as from July 1st, This right was contested by some operators and the European Commission brought Belgium before the European Court for this Belgian legislation. Begin October 2010, the European Court has passed judgement and in January 2011, the Constitutional Court has annulled certain provisions of the Belgian law. On 29 June 2012 a new law was voted to comply with the European legislation. No results concerning the application of this new law are available at 31 December On 29 December 2013 the Constitutional Court has confirmed the possibility of the retroactivity of the financing since However, the I.B.P.T. still has to decide if there is a net cost and an unsupportable burden per operator. 83

155 Note 36. Share-based Payment Discounted Share Purchase Plans In 2012 and 2013, the Group launched Discounted Share Purchase Plans. Under the 2012 and 2013 plans, Belgacom sold respectively 208,433 and 219,935 shares to the senior management of the Group at a discount of 16.66% compared to the market price (discounted price of respectively EUR per share and EUR 14.51). The cost of the discount amounted to EUR 0.6 million in 2012 and EUR 0.7 million in 2013 and was recorded in the income statement as personnel expenses (see note 26). Performance Value Plan In 2013, Belgacom launched a new Performance Value Plan for its senior management. Under this Long-Term Performance Value Plan, the granted awards are conditional upon a blocked period of 3 years after which the Performance Values vests. The possible exercising rights are dependent on the achievement of market conditions based on Belgacom s Total Shareholder Return compared to a group of peer companies. After the vesting period rights can be exercised during four years. The settlement method in equity or cash is defined at grant date. In case of voluntary leave during the vesting period, all the non-vested rights and the vested rights not exercised are forfeited. In case of involuntary leave or retirement, except for serious cause, the rights continue to vest during the normal 3 year vesting period. The group determines the fair value of the arrangement at inception date and the cost is linearly spread over the vesting period with corresponding increase in equity for equity settled and liability for cash settled shared based payments. For cash settled share-based payment the liability is periodically re-measured. The initial fair value amounts to EUR 5.9 million for the 2013 tranche. The calculation of simulated total shareholder return under the Monte Carlo model for the remaining time in the performance period for awards with market conditions included the following assumptions as of April 30th and December 31, 2013: Weighted average risk free of return Expected volatility - company Expected volatility - peer companies Weighted average remaining measurement period As o f 30 April 31 December % 0.60% 23% 24% 15% - 62% 15% - 58% 3.0 2,5 Employee Stock Option Plans In 2012, Belgacom launched a last yearly tranche of the Employee Stock Option Plan whereby 840,732 share options were granted to the key management and senior management of the Group. The Plan rules were adapted early 2011 according to the Belgian legislation. Therefore as from 2011, the Group launched two different series: one for the Belgacom Management Committee (BMC), Chief Executive Officer included (298,259 share options in the 2012 tranche) and one for the other key management and senior management (542,473 share options in the 2012 tranche). As prescribed by IFRS 2 ( Share-based Payments ), the Group recognizes the fair value of the equity portion of the share options at inception date over their vesting period in accordance with the graded vesting method and periodic remeasurement of the liability component. Black&Scholes is used as option pricing model. Such fair value amounted to EUR 2.5 million for the 2012 tranche. The annual charge of the graded vesting including the liability component re-measurement is recognized as personnel expenses and amounts to EUR 8.7 million in 2012 and EUR 4.5 million in At the moment of exercise, the employee will pay the exercise price of EUR for the 2012 tranche, with physical delivery of the share. The share options are exercisable 13 May 2019 for the 2012 tranche at the latest. The tranches granted in 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011 and 2012 are still open. All the tranches except the 2004 tranche provide the beneficiaries with a right to the dividends declared after granting the options. The dividend liability amounted to EUR 17 million on 31 December 2012 and EUR 11 million on 31 December 2013 and is included under the caption Other current payables. The right to dividends granted to the beneficiaries of the tranches is not limited in time and corresponds to the contractual life of the tranches. 84

156 In 2009, the Group gave the opportunity to its option holders to voluntary extend the exercise period of all the former tranches (except the 2009 tranche) with 5 years, within the guidelines as established by the law. For all the tranches except the 2004 tranche and the BMC series of 2011 and 2012 tranches (as described below), in case of voluntary leave of the employee, all unvested options forfeit except during the first year, for which the first third of the options vests immediately and must be exercised prior to the second anniversary following the termination date of the contract, as for all vested options; in case of involuntary leave of the employee, except for serious cause, all unvested options vest immediately and must be exercised prior to the second anniversary following the termination date of the contract or prior to the expiration date of the options whichever comes first, as for all vested options; in case of involuntary leave of the employee for serious cause, all options forfeit immediately. For the BMC serie of the 2011 and 2012 tranches: in case of voluntary leave of the BMC member during a period of three year following the grant 50% of the options immediately forfeit. If the voluntary leave takes place after that date, the options continue to vest according to the plan rules and regular vesting calendar. The exercise may only take place at the earliest on the first business day following the 3rd anniversary of the offer date. The exercise should take place prior to the 5th anniversary following the termination of the contract or prior to the expiration date of the options, whichever comes first, otherwise the options become forfeited; in case of involuntary leave of the BMC member, except for serous cause, the options will continue to vest according to the plan rules and regular vesting calendar. The exercise may only take place at the earliest on the first business day following the 3rd anniversary of the offer date. The exercise should take place prior to the 5th anniversary following the termination of the contract or the expiration date of the options, whichever comes first, otherwise the options become forfeited; In case of involuntary leave of the BMC member for serious cause, all options forfeit immediately. The evolution of the stock option plans is as follows: Nu mb er o f s to ck o p ti o n s The volatility has been estimated based on the actual trading statistics of the share and taking into account alignment to certain peers, comparable in terms of risk profile (volatility: 28%). Note 37. Relationship with the auditors Outs ta nding a t 31 December ,359 54,130 95, , , , ,116 1,002, ,732 Exercis a ble a t 31 December ,359 54,130 95, , , , , ,879 5,000 Movements during the year 2013 Granted 0 Forfeited 0 0-1,332-48,257-98,723-23, , , ,414 Exercised 0-12,812-50, , ,963-1,650-2,257-2,026 Expired Total 0-12,812-51,948-48, , , , , ,440 Outs ta nding a t 31 December ,359 41,318 44, , , , , , ,292 Exercis a ble a t 31 December ,359 41,318 44, , , , , , ,802 Exercis e price The Group expensed for the Group s auditors during the year 2013 an amount of EUR 1,266,590 for the annual audit mandate fees and EUR 251,595 for non-mandate fees. This last amount is detailed as follows: EUR Aud i to r Netwo rk o f a ud i to r Other mandatory audit missions 35,940 0 Tax advice 0 13,420 Other missions 87, ,193 To ta l 122, ,

157 Note 38. Segment reporting As from 1 January 2008 onwards, the Board of Directors, the Chief Executive Officer and the Belgacom Management Committee managed the operations of Belgacom Group based on the new client-oriented organization structured around the five following reportable operating segments: The Consumer Business Unit (CBU) sells voice products and services, internet and television, both on fixed and mobile networks, to residential clients, mainly on the Belgian market; The Enterprise Business Unit (EBU) sells ICT services and products to professional clients, whether they are independent workers, smaller firms or major companies. These ICT solutions, including telephone services, are marketed mainly under the Belgacom, Proximus and Telindus brands, on both the Belgian and international markets; The Service Delivery Engine & Wholesale (SDE&W) centralizes all the network and IT services and costs (excluding costs related to customer operations and to the service delivery of ICT solutions), provides services to CBU and EBU and sells these services to other telecom and cable operators; International Carrier Services (ICS) is responsible for international carrier activities; Staff and Support (S&S) brings together all the horizontal functions (human resources, finance, legal, strategy and corporate communication), internal services and real estate supporting the Group s activities. No operating segments have been aggregated to form the above reportable operating segments. The Group monitored the operating results of its reportable operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance was evaluated on the following basis: The operating income before depreciation and amortization and before non-recurring income and expenses; and The capital expenditures. Group financing (including finance expenses and finance income) and income taxes were managed on a group basis and are not allocated to operating segments. The accounting policies of the operating segments are the same as the significant accounting policies of the Group. Segment results are therefore measured on a similar basis as the operating result in the consolidated financial statements. Intercompany transactions between legal entities of the Group are invoiced on an arm s length basis. (EUR mi lli o n ) Co n s u mer B u s i n es s Un i t Enterp ri s e B u s i n es s Un i t Year ended 31 December 2013 Sta ff & Sup p o rt Servi ce D eli very Eng i n e & Who les a le In tern a ti o n a l Ca rri er Servi ces In ters eg men t eli mi n a ti o n s To ta l Net revenue 2,201 2, , ,239 Other operating income Intersegment income TOTAL SEGMENT INCOME 2,226 2, , ,318 Costs of materials and services related to revenue , ,561 Personnel expenses and pensions ,142 Other operating expenses TOTAL OPERATING EXPENSES before depreciation & amortization -1,255-1, , ,605 TOTAL SEGMENT RESULT (1) 971 1, ,713 Non-recurring expenses OPERATING INCOME / (LOSS) before depreciation & amortization 954 1, ,699 Depreciation and amortization OPERATING INCOME / (LOSS) 799 1, Net finance costs -96 INCOME BEFORE TAXES 822 Tax expense -170 NET INCOME 652 Non-controlling interests 22 Net income (Group share) 6 30 (1) Operating income before depreciation and amortization and before non-recurring income and expenses (EUR mi lli o n ) Co n s u mer B u s i n es s Un i t Enterp ri s e B u s i n es s Un i t Year ended 31 December 2013 Sta ff & Sup p o rt Servi ce D eli very Eng i n e & Who les a le In tern a ti o n a l Ca rri er Servi ces In ters eg men t eli mi n a ti o n s To ta l Capital expenditure

158 (EUR mi lli o n ) Co n s u mer B u s i n es s Un i t Enterp ri s e B u s i n es s Un i t Year ended 31 December restated Servi ce D eli very Eng i n e & Who les a le Sta ff & Sup p o rt In tern a ti o n a l Ca rri er Servi ces In ters eg men t eli mi n a ti o n s To ta l Net revenue 2,298 2, , ,415 Other operating income Intersegment income TOTAL SEGMENT INCOME 2,321 2, , ,462 Costs of materials and services related to revenue , ,611 Personnel expenses and pensions ,126 Other operating expenses TOTAL OPERATING EXPENSES before depreciation & amortization -1,330-1, , ,661 TOTAL SEGMENT RESULT (1) 991 1, ,801 Non-recurring expenses OPERATING INCOME / (LOSS) before depreciation & amortization 991 1, ,786 Depreciation and amortization OPERATING INCOME / (LOSS) 852 1, ,038 Net finance costs -131 INCOME BEFORE TAXES 907 Tax expense -177 NET INCOME 730 Non-controlling interests 19 Net income (Group share) 712 (1) Operating income before depreciation and amortization and before non-recurring income and expenses (EUR mi lli o n ) Co n s u mer B u s i n es s Un i t Enterp ri s e B u s i n es s Un i t Year ended 31 December 2012 Sta ff & Sup p o rt Servi ce D eli very Eng i n e & Who les a le In tern a ti o n a l Ca rri er Servi ces In ters eg men t eli mi n a ti o n s To ta l Capital expenditure In respect of geographical areas, the Group realized EUR 4,236 million net revenue in Belgium in 2012 and EUR 4,011 million in 2013 based on the country of the customer. The net revenue realized in other countries amounted to EUR 2,179 million in 2012 and EUR 2,227 million in More than 90% of the segment assets are located in Belgium. Note 39. Recent IFRS pronouncements The Group does not early adopt the standards or interpretations that are not yet effective at 31 December This means that the Group did not apply the following standards or interpretations that are applicable for the Group as from 1 January 2014 or later: Annual Improvements to IFRS s ( cycle) and ( cycle); Amendments to standards: o o o o o Amendments to IAS 27 ( Separate Financial Statements ) and IAS 28 ( Investments in Associates and Joint Ventures ); Amendments to IAS 32 ( Offsetting Financial Assets and Liabilities ); Amendment to IAS 39 ( Novation of Derivatives and Continuation of Hedge Accounting ); Amendment to IAS 19 ( Employee Benefits Employee Contributions ); Amendment to IAS 36 ( Impairment of Assets Recoverable Amount Disclosures for Non-Financial Assets ). Newly issued standards: o o o o o IFRS 9 ( Financial Instruments ), IFRS 10 ( Consolidated Financial Statements ) that supersedes part of IAS 27 ( Separate Financial Statements ) and SIC-12 ( Consolidated Special Purpose Entities ), IFRS 11 ( Joint Arrangements ) that supersedes part of IAS 31 ( Interests in Joint Ventures ) and SIC-13 ( Jointly Controlled Entities Non Monetary Contributions by Venturers ), IFRS 12 ( Disclosure of Interests in Other Entities ), IFRIC Interpretation 21 ( Levies ) The Group will investigate the possible impacts of the application of these new standards and interpretations on the Group s financial statements in the course of The Group does not anticipate material impacts from the initial application of IFRS The application of IFRS 12 will result in more extensive disclosures in the consolidated financial statement and applies to interests in subsidiaries, joint arrangements and associates. Note 40. Post balance sheet events Belgacom has entered into exclusive negotiations with Vivendi with respect to the sale of its fully owned subsidiary Groupe Telindus France. Completion of the transaction is subject to the satisfaction of certain conditions precedent among which approval by the French Competition Authorities. 87

159 AUDITOR S REPORT 88

160 89

161 90

162 THE REGULATORY FRAMEWORK Mobile termination rates (MTR) In application of the BIPT decision of 29 June 2010, MTR in Belgium have been set at a rate of 1,18 eurocents/min (incl. inflation) for the three mobile operators since 1 January This last step of the glide path imposed in 2010 has therefore finally established fully symmetric MTR in Belgium. BIPT decision of 29 June 2010 on MTR ct Before* 01-Aug-10* 01-Jan-11* 01-Jan-12* 01-Jan-13* Proximus 7,20 4,62 3,94 2,62 1,18 Mobistar 9,02 5,05 4,29 2,79 1,18 Base 11,43 5,81 4,90 3,11 1,18 *Including inflation MTR-Glidepath in ct Proximus Mobistar Base Before* 01-Aug-10* 01-Jan-11* 01-Jan-12* 01-Jan-13* *Including inflation The BIPT is currently developing a new cost model to determine MTR tariffs for the period On 21 November 2013, the BIPT communicated the preliminary version of this cost model to the mobile operators. On 14 July 2010, Mobistar and KPN /BASE each filed a separate appeal before the Brussels Appeal Court against the BIPT decision of June. After rejecting the request for suspension on 15 February 2011, the Appeal Court considered, on 16 May 2012, that the BIPT had failed to consult the regional regulators, but rejected the substantial arguments in the case on the merits. Awaiting another decision of the Appeal Court or a BIPT repair decision, the current MTR rates remain fully valid. On 16 January 2014, the Luxembourg regulator, ILR, published its decision concerning its review of the MTR market analysis. The three mobile operators (EPT, Tango and Orange) are considered as having significant market power. ILR intends to define the MTR on the basis of a pure bottom-up long run incremental cost (LRIC) cost model. Until the finalisation of this model, ILR has set symmetrical MTR at 0,98 eurocent/min as from 1 February. MTR were previously at 8,2 eurocents for EPT and Tango and 10,5 eurocents for Orange. Tango has decided to introduce an appeal against this decision. 91

163 International roaming The first Roaming Regulation of 2007 introduced caps on retail and wholesale voice roaming prices. In July 2009, the EU authorities adopted revised rules (Roaming II Regulation) that cut roaming charges further for voice, SMS and wholesale data roaming in 2010 and The Roaming III Regulation that entered into force on 1 July 2012 has introduced two so-called structural measures to encourage competition: (i) MVNO wholesale access from 1 July 2012 and (ii) decoupling, i.e. separate selling of roaming services from domestic mobile services, from 1 July The Regulation also lays down rules aimed at increasing price transparency and improving the provision of information on charges to roaming customers. Awaiting the full effects of the structural measures, the Regulation has imposed a further lowering of the existing regulated retail and wholesale price caps (from 35 eurocents on 30 June 2012 to 19 eurocents for retail outgoing calls by 1 July 2014 and from 11 eurocents to 6 eurocents for retail SMS) and has extended the Roaming Regulation to retail data as from July 2012 (70 eurocents on 1 July 2012 decreasing to 20 eurocents as from 1 July 2014). Voice Roaming ( ct per minute) Retail Outgoing Retail Incoming Wholesale Outgoing SMS Roaming ( ct per sms) Retail Wholesale July '09 July '10 July'11 July '12 July'13 July '14 July '09 July '10 July'11 July '12 July'13 July '14 Data Roaming ( ct per Mb) Retail Wholesale July '09 July '10 July'11 July '12 July'13 July '14 The Roaming III Regulation will expire in principle on 30 June However, in the meantime, the EU Commission has proposed in its package of measures to address the fragmentation of the EU telecom sector, referred to as Connected continent, to impose additional measures to abolish roaming surcharges in the coming years. 92

164 Spectrum A law of 25 March 2010 has required the mobile operators to pay for the tacit extension of their 2G licenses until The amount of EUR 74 million for Belgacom for this extension corresponds to the original 2G license fee proportionate to the spectrum quantity and duration. The mobile operators appealed this law before the Constitutional Court that, in June 2011, submitted a certain number of questions to the European Court of Justice in order to ascertain whether the Belgian law complies with the EU directives. By judgment issued on 21 March 2013, the EU Court confirmed that imposing a fee for the renewal of a license is in conformity with the directives. Based on this ruling, the Constitutional Court finally rejected Belgacom, Mobistar and KPN/BASE appeals on 17 October These decisions did not have any impact on Belgacom that had anyway decided to make the payments. Beside this annulment procedure, Belgacom initiated on 7 October 2010 an action against the Belgian State and the BIPT to ensure the possibility to recover the undue license fees. On 22 December 2010, 2G licenses were also extended until 15 March An additional payment for the period will be due. The one-off fee to be paid for this spectrum is set in the telecom law and has remained unchanged. Through the acquisition of its 2100 MHz spectrum in 2011, Telenet Tecteo Bidco obtained rights for 900/1800MHz spectrum. For that purpose, existing operators would have had to give back 24 channels in the 900 MHz band and 18 channels in the 1800 MHz band by November However, on 12 December 2013, Telenet Tecteo Bidco informed the BIPT of their decision to renounce to these 900/1800 MHz rights. As a consequence, this released spectrum is open again. The draft Royal Decree setting the modalities for reselling this spectrum has been adopted in first reading by the Council of Ministers in February The draft foresees that the operators will be allowed to choose how many channels they want to acquire up to a max of one third (8 channels each in the 900 MHz band). If one operator asks for less spectrum, the remaining amount will be divided among the two others to obtain more than 8 channels. Those additional channels will be subject to the payment of a concession fee as foreseen in the telecom law. The Royal Decree foresees the possibility of having more than three candidates. In such case, an auction would be organized for three lots of 8 channels. The Royal Decree however recognizes that it would be rather unlikely to have more than three candidates (because of the small amount of spectrum and the short duration of the license). The spectrum award is expected to happen by the end of The process for reallocation should be finalized by November After the redistribution, a reshuffling of the spectrum could be requested. Before 27 November 2015, the operators will have the possibility to increase their 1800MHz spectrum up to max 124 channels (Belgacom has currently 104 channels). The usage rights on the total spectrum obtained at the end of this procedure will be valid until 15 March On 12 November 2013, the BIPT has proceeded with the auction of the 800 MHz spectrum (resulting from the digital dividend). This auction was concluded after two rounds and the three blocks were sold at the minimum price of EUR 120 mio each. Each lot entails national coverage obligations (with a minimum speed of 3Mbps): 30% after 2 years, 70% after 4 years and 98% after 6 years. Belgacom acquired lot 2 which has the advantage to facilitate coordination with foreign operators at the national borders. Lot 3, which has been acquired by Mobistar, includes additional coverage obligations in rural areas (60 municipalities mainly in Wallonia) that must be reached within three years. KPN Group Belgium acquired the third lot. On 30 November 2013, the authorization was formally notified to Belgacom. The license is valid until 29 November Belgacom has decided to pay the concession fee in annual instalments. The norm for electromagnetic fields in Belgium is a regional matter. These norms are different depending on the region. In the Brussels Capital Region, the norm was 3V/m to be shared between all operators and all technologies. The mobile operators have repeatedly criticized this norm which is the most stringent in the world, obliges them to deploy additional sites and seriously hinders the possibility to roll out new mobile technologies in Brussels such as 4G LTE on top of 2G and 3G. Finally, end October 2013, a political agreement was reached to modify the current environmental framework. The agreement provides a global norm of 6 V/m (4 times more than the current 3 V/m) and 25% of the global norm per operator. Exceptionally 33% and even 50% will be granted for periods of 18 months. The modification of the Ordinance has been adopted on 24 January 2014 and the executing decrees should be adopted in March. In December 2013, the Walloon government decided to levy, as of 2014, a tax on mobile telecom equipment of EUR per site. Belgacom intends to safeguard its legal right to contest this legislation. 93

165 Networks The BIPT market analysis decision of 1 July 2011 on wholesale broadband obliges Belgacom to provide a multicast functionality in its bitstream offer (to be used for broadcasting). The multicast functionality has been implemented since April On 11 September 2013, the European Commission adopted its Recommendation on consistent non-discrimination obligations and costing methodologies to promote competition and enhance the broadband investment environment. This Recommendation provides guidelines on how costing of copper assets should be done and under which circumstance price regulation on new network investments can be lifted and provides guidelines on how to ensure non-discrimination. Belgacom s prices for unbundled lines are situated at the low end of the new EU Recommendation. On 28 February 2014, the European Council and Parliament endorsed new rules aimed at lowering the cost of deploying new broadband networks. The text aims to achieve this by measures such as promoting sharing of infrastructure, easier access to civil engineering resources, better coordination, etc. Civil engineering, such as digging up roads to lay fibre, can account for up to 80% of the costs of deploying high-speed networks and the Commission claims that these measures can save as much as 30% on the cost of rolling out a fibre network. The text still needs to be formally adopted by the Parliament in April and by the Council in June. Member States will then have to adopt national provisions to comply with the directive by 1 January 2016 and they must apply the new measures by 1 July As the directive only sets minimum requirements, Member States may adopt additional measures in this area. In December 2013, the BIPT published a decision on operational aspects of the unbundling and bitstream which covers a.o. a series of modifications to improve the readability and transparency of Belgacom s reference offers and re-evaluates the objectives and compensations of some SLAs (mainly repair) which are made stricter than the former levels. By its decision of 19 February 2014, the BIPT has authorized Belgacom to deploy the vectoring technology on its VDSL2 network as from February 2014 [Vectoring is a technology that allows to boost download speeds by reducing interference between the copper loops in the same bundle]. Fiber to the home (FTTH) and fiber to the building (FTTB) technologies are currently not included in the scope of the Belgian regulation. The BIPT will address the question regarding the regulatory treatment of FTTH in the context of its review of the market analysis for broadband, which is foreseen in Consumer protection The telecom Minister has, since 2012, strengthened different aspects of the Belgian consumer protection rules. In 2013, several decrees have pursued the implementation of the 10 July 2012 Law, a.o. (i) the Royal Decree implementing the one day delay for number portability that entered into force on 1 October 2013, (ii) the Royal Decree defining the modalities to be applied to send free-of-charge alerts to the customers in case of abnormal or excessive consumption to avoid bill shocks that has been applicable since 1 February 2014, (iii) the Royal Decree defining the content of the standard information sheets that the operators will have to prepare for each price plan in order to allow a comparison between the offers will enter into force on 1 July In addition, the operators have been obliged since 28 October 2013 to publish a series of information in favour of disabled people and since 1 July 2013, all fixed broadband operators need to inform new customers about the internet speed (download and upload) they can expect. In December 2013, the Minister has launched a 'Switch & Save' campaign to encourage mobile consumers to find a cheaper service plan. Proximus, Mobistar, KPN/BASE, Telenet and Voo are expected to contact, by 30 September 2014, 90 % of their customers on plans more than two years old. The commitment of the operators will be controlled by the BIPT. The BIPT monitors the application of the law by the operators and, in February 2013, it has imposed a fine of EUR to Telenet and Mobistar and of EUR to Scarlet for incomplete information on the customers invoices. 94

166 Universal service Since 1998, Belgacom has been subject to a broad Universal service obligation which is the most extensive regime in Europe. The law of 10 July 2012 implementing the EU framework of 2009 has opted for a new organisation of the Universal Service by foreseeing that the BIPT or the Government can decide or advise to abolish certain obligations depending on market offer conditions. The BIPT decided on 6 May 2013 to lift the universal payphone obligation for Belgacom or any other provider, with immediate effect. Likewise, the Government, on advice of the BIPT, decided by Royal Decree of 15 December 2013 that no new obligations must be imposed for the directory enquiry services as well as for the paper and electronic directories. The BIPT will have to monitor the quality and (financial) availability of these services that will continue to be provided on a commercial basis. In case they would state a negative impact on the level of consumer protection, new obligations might be imposed. The notion of functional internet access has been extended to include broadband provisioning and a Royal Decree will have to determine the required minimum speed that Belgian citizens are entitled to. In December 2013, the BIPT has proposed to set this minimum speed at 1 Mbps (100% coverage for reasonable requests) all the time except 1 hour/day maximum. Once the minimum speed will have been formally set, the provision of internet access with this minimum speed will have to be guaranteed to all. The BIPT proposes an open procedure and will make sure that this procedure will allow application by consortiums of operators using different technologies. Belgacom may submit an application or, in absence of a successful open procedure, the BIPT might decide to assign Belgacom or any operator as default broadband USO provider. So far, Belgacom has never been compensated for providing the Universal service. The former funding system set in 2005 was withdrawn following appeals introduced by competitors before the Belgian and EU Courts. The law of 10 July 2012 has modified the financing system of social tariffs and has foreseen calculation of the net cost and a potential financing as from mid Belgacom renewed its request for compensation immediately after the entering into force of this law. Mobistar and KPN/BASE jointly filed a request for annulment of the new legal provisions before the Belgian Constitutional Court regarding the inclusion of the social tariffs for mobile voice and internet subscriptions in the universal service obligations compensation system and the retro-activity of the right to ask for compensation for the net costs related to the offer of social tariffs. On 19 December 2013, the Constitutional Court rejected the appeal and confirmed the possibility of retroactive funding since The Court also decided to submit a prejudicial question to the EU Court of Justice regarding the compatibility with the Universal service directive of social tariffs related to internet and mobile voice. Net neutrality Net neutrality that represents the idea that all data on the internet should be treated equally, whatever its source or destination, has been on the EU and Belgian agenda for some time. This issue has been debated in the context of the package presented on 12 September 2013 by the European Commission to address the fragmentation of the EU telecom sector. The Commission has proposed to address the issue of 'net neutrality' via a ban on blocking or throttling of competing services. In addition, operators would need to be more transparent about the actual broadband speeds. However, they would still have the right to offer higher or guaranteed speeds at an increased price to customers in need of a premium service. The EU Parliament on its side pushes for more strict net neutrality rules. The adoption of this so-called Connected continent package will not be achieved during this term of the European Parliament, but probably come to a conclusion with the new European Parliament installed after the May 2014 elections. In Belgium, the 2005 Law as revised by the law of July 2012 contains transparency obligations regarding traffic management and impact on quality of service. The law also gives BIPT the possibility to impose minimum quality of service requirements to prevent the degradation of service and the hindering or slowing down of traffic over networks. Legislative proposals have been made in 2011 with a view either to create a specific net neutrality Act or even to enshrine this principle in the Belgian Constitution. In January 2014, the Belgian law was suspended awaiting the definition of new net neutrality rules at EU level in the context of the abovementioned Connected continent package. 95

167 Cable regulation On 1 July 2011, the Belgian telecom and media regulators (BIPT, CSA, Medienrat and VRM) decided to regulate the dominant cable operators in their respective coverage areas and to require them to resell analogue TV, to open up their digital TV platform, and to resell broadband. Belgacom could only obtain access to analogue TV. In 2013, the regulators have completed the framework for the opening of the cable on basis of their decisions of July On 29 October, they published the reference offers of Telenet, Tecteo, Brutélé and Coditel (Numéricable) and on 12 December their decisions on the regulated wholesale prices applicable to these operators. These pricing decisions set the (i) non-recurrent one-time fees and per-line fees to be paid when a customer leaves a cable operator for an alternative operator (EUR 2 to EUR 5) and the (ii) monthly rental fees set on a retail minus basis (minus 20 to 30% depending on the case). The six-month implementation period has started with the request made by Mobistar to Telenet and Tecteo on 17 January To be noted that in the meantime Belgacom has abandoned the possibility to resale analogue TV since this technology is outdated. 96

168 KEY FINANCIAL EVENTS 2012 >> Acquisition of the chain of The Phone House stores >> Accounting adjustment for EUR -34 million at the EBITDA level due to the introduction of the new telecom law 2010 >> Integration of Belgacom and some of its subsidiaries in one legal entity impacting segments but neutral on Group level >> BICS fully consolidated following acquisition of control, effective as from 1 January 2010 >> Belgacom concludes strategic partnerships with OnLive (gaming), Jinni (search engine) and In3Dept Systems (3D-gesture recognition) 2008 >> Divesture of all non-core presences of Telindus International >> Acquisition of Scarlet, Tango and Mobile-for >> Exclusive broadcasting rights for Belgian soccer 2006 >> Acquisition of Telindus Group >> Sale of stake in Neuf Cégétel >> Launch of EUR 1.65 billion bond >> Acquisition of Vodafone s 25% share in Proximus >> ICS outsourcing deal with MTN 2004 >> Belgacom IPO >> Extensive launch Broadway project (Fibre & VDSL) 2013 >> Significant impact of the regulatory context and mobile price decreases >> Investments in 800 MHz licence, in technological development of fixed and mobile networks and in their simplification 2011 >> Telindus France acquires Eudasys >> Divesture Telindus Spain >> Belgacom acquires 4G-license >> Belgacom issues new 7-year senior unsecured institutional bond for EUR 500 million >> Successful early bond buyback operation, followed by redemption in cash of remaining balance of the November 2011 EUR 775 million notes 2009 >> BICS and MTN combine their International Carrier Services >> Activity of WIN SA sold 2007 >> Remaining stake in Mobistar (acquired via Telindus group transaction) sold >> Acquisition of Dutch storage specialist ISIT 2005 >> Launch Belgacom TV >> Exclusive broadcasting rights for Belgian soccer >> Disposal of shares in Eutelsat >> Belgacom ICS concludes Joint Venture with Swisscom ICS, proportionally consolidated >> Belgacom sells Belgacom Directory Services, Expercom and liquidated Infosources

169 Registered Office Belgacom SA under public law Bd. du Roi Albert II 27 B Brussels VAT BE Brussels Register of Legal Entities Disclaimer This communication contains forward-looking statements, including statements about the Company s beliefs and expectations. These statements are based on the Company s current plans, estimates and projections, as well as its expectations of external conditions and events. Forward-looking statements involve inherent risks and uncertainties and speak only as of the date they are made. The Company undertakes no duty to and will not necessarily update any of them in light of new information or future events, except to the extent required by Belgian law. The Company cautions investors that a number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements. For further information Dirk Lybaert Executive Vice President Corporate Affairs Bd. du Roi Albert II/Koning Albert II-laan, 27 B Brussels Tel: hello@belgacom.be For financial information Nancy Goossens Vice President Investor Relations Bd. du Roi Albert II/Koning Albert II-laan 27 B Brussels Tel: Fax: investor.relations@belgacom.be DISCOVER THE ONLINE VERSION OF THIS ANNUAL REPORT AT

170 belgacom FINANCIAL REPORT 2013

171 FINANCIAL KEY FIGURES Income Statement (EUR million) Restated (4) 2013 Total income 5,540 5,458 6,100 6,065 5,978 5,990 6,603 6,406 6,462 6,318 before non-recurring items Non-recurring income Total income 5,540 5,696 6,100 6,065 5,986 6,065 7,040 6,417 6,462 6,318 Non-recurring expenses EBITDA (1) before non-recurring items 2,394 2,214 2,149 2,077 1,990 1,955 1,984 1,912 1,801 1,713 EBITDA (1) 2,353 2,098 2,149 2,031 1,905 1,967 2,428 1,897 1,786 1,699 Depreciation and amortization Operating income (EBIT) 1,611 1,372 1,347 1,256 1,161 1,261 1,619 1,141 1, Net finance income / (costs) Income before taxes 1,584 1,436 1,451 1,258 1,053 1,144 1,517 1, Tax expense Non-controlling interests Net income (Group share) , Cash flows and Capital Expenditures (EUR million) Restated (4) 2013 Cash flows from operating activities 1,899 1,883 1,643 1,581 1,552 1,406 1,666 1,551 1,480 1,319 Cash paid for acquisitions of intangible assets and property, plant and equipment Cash flows from / (used in) , other investing activities Free cash flow (2) 1,421 1,575-1,313 1, Cash flows from / (used in) -1,658-1, , , financing activities Net increase / (decrease) of cash and cash equivalents Balance sheet (EUR million) As of 31 December Restated (4) 2013 Balance sheet total 5,368 5,831 7,300 7,325 7,782 7,450 8,511 8,312 8,243 8,417 Non-current assets 3,963 3,808 5,504 5,072 5,564 5,505 6,185 6,217 6,192 6,254 Investments, cash and cash equivalents Shareholders' equity 2,223 2,221 2,391 2,520 2,271 2,521 3,108 3,078 2,881 2,846 Non-controlling interests Liabilities for pensions, other 760 1, post-employment benefits and termination benefits Net financial position ,636-1,167-1,835-1,716-1,451-1,479-1,601-1,815 Belgacom share - key figures Restated (4) 2013 Basic earnings per share before non-recurring items (EUR) Basic earnings per share (EUR) Diluted earnings per share (EUR) Dividend per share, gross (in EUR) Interim/special dividend per share, gross (in EUR) Weighted average number of ordinary 358,612, ,406, ,621, ,017, ,179, ,475, ,138, ,963, ,011, ,759,360 shares (3) Share buyback (EUR million) Data on employees Restated (4) 2013 Number of employees 16,933 16,335 18,180 17,942 17,371 16,804 16,308 15,788 15,859 15,699 (full-time equivalents) Average number of employees 17,108 16,388 18,163 17,995 17,465 16,878 16,270 15,699 15,952 15,753 over the period Total income before non-recurring 323, , , , , , , , , ,080 items per employee (EUR) Total income per employee (EUR) 323, , , , , , , , , ,080 EBITDA (1) before non-recurring items 139, , , , , , , , , ,735 per employee (EUR) EBITDA (1) per employee (EUR) 137, , , , , , , , , ,851 Ratios Restated (4) 2013 Return on Equity 42,2% 43,1% 40,7% 38,8% 37,5% 35,6% 30,9% 24,9% 25,0% 22,5% Gross margin 73,6% 71,5% 67,1% 66,8% 67,0% 65,2% 60,0% 60,7% 59,6% 59,5% Net debt / EBITDA before non-recurring items 0,0-0,2 0,8 0,6 0,9 0,9 0,7 0,8 0,9 1,1 (1) Earnings Before Interests, Taxes, Depreciation and Amortization (2) Cash flow before financing activities (3) i.e. excluding Treasury shares (4) As a consequence of the adoption in 2013 of IAS 19R with retrospective application, the new accounting principles have been applied to 2012 figures

172 CONSOLIDATED MANAGEMENT REPORT MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS Belgacom Group Group revenue of EUR 6,318 million; 2.2% lower than for 2012 Group EBITDA 1 of EUR 1,713 million, i.e. -4.9% lower than for 2012 Full-year EBITDA margin of 27.1% Belgacom generated EUR 505 million Free Cash Flow in 2013 Revenues 5,990 Revenue (in mio ) before non-recurring items 6,603 6,406 6,462 6, The Belgacom Group ended the year 2013 with total revenue of EUR 6,318million, or 2.2% lower than for Capital gains 2 and other one-off 3 impacts excluded, the Belgacom Group revenue was 2.9% or EUR 186 million lower than the previous year. Like its peers in the European Telecoms industry, Belgacom saw its revenue pressured by regulatory measures 4, including both local and European imposed price reductions. This caused a EUR 85 million revenue loss for the Belgacom Group, or 1.3%. Furthermore, as a result of the sale of some its The Phone House stores 5, Belgacom generated less revenue from this sales channel. Belgacom s revenue was significantly impacted by a tough mobile market, resulting from the new Belgian Telecom law, in force since October 2012, and more aggressive price competition on the Belgian Mobile market. Revenue Evolution (in mio ) 6, ,318 FY 2012 Net Impact One-offs Regulatory impact Underlying CBU Underlying EBU Underlying SDE Underlying S&S BICS Intra-group elimination FY 2013 In particular, Belgacom saw its mobile revenue going down due to the loss of mobile postpaid and prepaid customers, and because of lower revenue per user due to the introduction of new attractive mobile prices. Even though Belgacom s ramping down of mobile prices and its successful retention actions could fairly quickly restore the customer churn levels and turn the mobile postpaid customer base back to growth, the financial effect was substantial for both the Consumer and Enterprise segment. 1 EBITDA before non-recurring items 2 In 2013, the Belgacom Group realized EUR 31 million capital gains on the sale of technical buildings in the framework of its network simplification program. 3 One-off amounts impacting the year-over-year variance, including accounting adjustments and provision reversals. 4 Regulatory price reductions on Roaming rates and Mobile Termination Rates. 5 As part of the agreement with the Competition Council, Belgacom sold some of The Phone House stores in November

173 The revenue pressure on Mobile was to some extent offset by a firm financial performance of the Fixed business, with growing revenue for Fixed Internet and TV services. For both services, Belgacom grew its customer base over the year 2013 and saw its revenue per customer slightly increase as a result of price indexation. Belgacom s International Carrier Segment, BICS, also showed a positive revenue contribution compared to the previous year driven by a firm uptake in Mobile revenue ,108 2,087 Operating expenses (in mio ) before non-recurring items ,107 1,117 1,126 1,142 2,642 2,517 2,611 2,561 Non HR HR COS 16,804 Headcount evolution (in FTE) 16,308 15,788 15,859 15, * Operating expenses The Belgacom Group s total operating expenses for 2013 amounted to EUR 4,605 million before non-recurring items, which is 1.2% lower compared to the year before. The Belgacom Group ended the year 2013 with EUR 2,561 million Cost of Sales, i.e. 1.9% lower than the previous year. Oneoffs 6 excluded, Belgacom s Cost of Sales was 0.9% lower. In addition to the positive effect from Belgacom s efforts to reduce costs through value management, the favorable evolution was driven by lower costs related to The Phone House as some of the stores were sold, and a positive impact from the lowered Mobile Termination Rates. The lower costs from the customer segments were partly offset by higher costs for BICS. The 2013 HR-expenses of EUR 1,142 million were up +1.4% versus This increase was mainly driven by the inflationbased wage indexation in January 2013, for a large part offset by the year-on-year reduction in headcount to 15,699 fulltime equivalents (-160 FTEs) and more capitalized manpower resulting from Belgacom s network and IT simplification projects in Early 2013, the last wave of employees which signed up for the Tutorship restructuring program, left Belgacom. This was partly offset by some business-critical hiring. The 2013 non-hr expenses for the Belgacom Group were down by 2.3% to a total of EUR 903 million, benefitting from continued company-wide cost containment efforts, and the lower costs related to The Phone House. This largely offset the impact in 2013 from resources required for Belgacom s simplification projects within the Service Delivery Engine segment. EBITDA 32.6% 1,955 1,984 EBITDA (in mio ) 30.0% 29.8% 27.9% 27.1% 1,912 1,801 1, * 2013 The Belgacom Group reported EUR 1,713 million EBITDA 7 for 2013, or 4.9% less than for Capital gains 8 and other one-off 9 impacts excluded, the Belgacom Group EBITDA was 8.7% or EUR 160 million lower than the previous year. Regulatory measures had a negative impact for a total amount of EUR 48 million, or -2.7%. The remaining decrease in EBITDA is mainly driven by a lower direct margin within the two customer segments. 6 Accounting adjustments recorded in the second quarter 2012 following the adoption of the New Telecom law and an accounting reallocation in the third quarter Before non-recurring items 8 In 2013, the Belgacom Group realized EUR 31 million capital gains on the sale of technical buildings in the framework of its network simplification program. 9 One-off amounts impacting the year-over-year variance, including accounting adjustments, impairment and provision reversals. 3

174 EBITDA Evolution (in mio ) 1, ,713 FY 2012 One-offs 2012 One-offs 2013 Regulatory impact Underlying CBU Underlying EBU Underlying SDE Underlying S&S BICS FY 2013 Tax Expense Effective tax rate 21.0% 21.6% 25.3% 19.5% 20.7% The effective tax rate was 20.7% for the year This is slightly above the effective rate of 19.5% for the year 2012 which included an accelerated use of tax losses. The 2013 tax rate results from the application of the general principles of Belgian tax and international law * * Normalized effective tax rate, excluding the non-recurring non-taxable gain of EUR 436 million CAPEX Capex (in mio ) 2013 Capex per BU (in mio ) % 17% 1% 4% CBU EBU BICS SDE 75% S&S The Belgacom Group s invested amount for the full-year 2013 totaled EUR 852 million, or 13.5% of Group revenue. This is EUR 972 including the 800 MHz spectrum license which Belgacom obtained for the minimum price of EUR 120 million. With network quality being an important differentiator in a more intense Belgian competitive market, investments in the Fixed and Mobile networks represent the majority of invested amounts. Apart from ongoing basic network investments for renewal and expanding capacity, Belgacom invested in increasing its download speeds on the broadband network through the implementation of Dynamic Line Management, an in-house developed technology, and started to prepare the network for the Vectoring roll-out in Furthermore, on the mobile side, Belgacom increased its mobile data speeds to 6 Mbps on average on 3G, rolled out Dual Carrier and continued to deploy the 4G technology, reaching over 50% outdoor coverage end-2013, with 4G availability in over 260 Belgian cities. The SDE&W division is also implementing a Network Simplification program and a company-wide IT change plan. 4

175 Free Cash Flow* FCF (in mio ) Belgacom ended the year 2013 with EUR 505 million of Free Cash Flow or EUR 186 million less than for the same period of 2012, mainly due to higher income tax payments, higher cash paid for Capex, and lower EBITDA partially offset by a positive evolution in the working capital. The FCF does not include the Capex acquisition of the 800 Mhz spectrum license paid over a 20-year period (EUR 120 million). Acquisition and financing are treated as a non-cash transaction. The 2013 reimbursement of EUR 6 million is included in the financing activities of the cash flow statement * Cash flow before financing activities Net financial position Compared to end-2012, the net financial debt increased by EUR 214 million to EUR 1,815 million per end of 2013 as the cash returned to shareholders in the form of dividends exceeded the 2013 Free Cash Flow. The outstanding long-term gross financial debt (re-measured at fair value) amounted to EUR 1.9 billion at the same date. The outstanding amount of EUR 114 million from the deferred payment arrangement for the 800 MHz license is not included in the net financial debt. Net financial position (in mio ) -1, , Net debt December 2012 FCF Dividends Non controlling interests Net sale of treasury shares Other Net debt December

176 Consumer Business Unit - CBU Consumer segment generated EUR 2,226 million revenue in 2013, down 4.1% from 2012 The disruption in the mobile market significantly reduced Mobile revenue Revenue growth from solid Fixed business provided some relief Good customer growth in 2013 for TV, Internet and Mobile postpaid Full-year segment result of EUR 971 million, i.e. a 2% decline compared to 2012 CBU revenues Revenue (in mio ) before non-recurring items 2,414 2,368 2,288 2,321 2, For the full-year 2013, CBU reported revenues of EUR 2,226 million or 4.1% less than for 2012 or -4.4% on a comparable basis 10. The year-over-year decrease is driven by the impact from the mobile disruption in the Belgian market. The increased price competition in combination with a new Telecom law, in force since October 2012, triggered an unprecedented volatility in the mobile market. Even though Belgacom succeeded in lowering churn levels early 2013, the prior Postpaid customer loss, a continued declining prepaid customer base, and the re-pricing of existing customers resulted in a significant loss of Mobile revenue. This was partly compensated for by a solid performance of fixed products, with both TV and Internet showing a sound revenue growth. Furthermore, regulatory measures reduced the 2013 revenue by EUR 27 million (-1.2%). This entails the effect from a further decline of Voice roaming tariffs, lower Mobile Termination Rates and the resulting decline in fixed -to-mobile tariffs, as well as the regulated capping of Mobile Data Roaming pricing. CBU Revenue Evolution (in mio ) 2, ,226 FY 2012 Net Impact One-Offs Regulatory impact Fixed Voice Fixed Data TV Mobile Service Revenue Subsidiaries Terminals & Others FY Excluding one-off accounting adjustments in 2012 and

177 Fixed voice revenue (in mio ) Fixed voice customers (in '000) 21.7 Fixed voice ARPU (in ) 2,028 1,933 1,818 1,718 1, * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units Belgacom generated EUR 410 million from Fixed Voice, or 3.4% less compared to The revenue pressure is mainly driven by a stable, though continued Fixed line erosion. In 2013, the consumer Fixed Voice customer base decreased by 84,000 lines. As a result, the Consumer segment ended 2013 with a total of 1,634,000 lines, 4.9% lower than the prior year. The ARPU, however, slightly increased to EUR 20.2 (+1.5%), positively impacted by price changes in Fixed Internet revenue (in mio ) Fixed Internet customers (in '000) Fixed Internet ARPU (in ) ,075 1,113 1,156 1,193 1, * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units Revenue from Fixed Internet grew 4.5% to EUR 354 million in This results from a combination of a growing customer base and some price changes in Driven by its successful Pack offers, the Consumer segment added 42,000 new Internet customers in the course of 2013, growing its customer base by 3.6% to 1,235,000. In 2013, the ARPU went up by 0.4% to EUR 26.6 as customer pricing was adjusted in exchange for more volume and speed. TV revenue (in mio ) TV customers (in '000) TV ARPU (in ) ,479 1,386 1, ,021 1,156 1,218 2nd stream HH Belgacom continued to grow its TV revenue, reaching EUR 267 million for This 13% revenue growth compared to 2012 resulted from Belgacom s successful convergent Pack sales, attracting 62,000 new households to Belgacom TV. By end 2013, Belgacom s TV customer base counted 1,218,000 TV households, or 1,479,000 when including multiple set-top boxes. Another revenue growth driver was the ARPU, supported by a price increase for rented settop boxes since February The 2013 ARPU increased to EUR 18.7, up 4.4% over the prior year. 7

178 Mobile Service Revenue (in mio ) Mobile customers (in '000) Mobile Blended ARPU (in ) , ,824 3,769 3,805 3,643 3, * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units The revenue generated by Belgacom s Consumer segment from Mobile services (i.e. combined revenue from Mobile Voice, Mobile Data and SMS) was significantly reduced in 2013 as a result of regulatory measures 11 and the mobile market disruption. This started mid-2012 and reached its zenith when the new Telecom law was adopted on 1 October In 2013, the consumer segment saw its revenue from Mobile services being reduced by EUR 119 million or 13% versus the prior year. This was due to a combination of postpaid customers lost in 2012, a decreasing prepaid customer base, and the effect of customers signing up for Belgacom s new, more attractive mobile price offers. Backed by its superior mobile network, attractive mobile offers and convergent Pack offers, Belgacom was able to restore the port-in/port-out balance fairly quickly, resulting in a net growth of 208,000 mobile postpaid Voice and Data cards. This brought the total postpaid base to 1,928,000 mobile cards by end Prepaid cards, however, continued to show a declining trend. The Consumer segment lost 283,000 prepaid cards, resulting in a total of 1,640,000 cards by end With mobile prices becoming more attractive, the blended mobile ARPU eroded to EUR 18.5, 8.9% lower compared to Lower regulated rates for Mobile Termination, Voice and Data Roaming 8

179 CBU operating expenses Total expenses (in mio ) 1,365 1,295 1,263 1,330 1, Segment result (in mio ) & margin 43.4% 45.3% 44.8% 42.7% 43.6% 1,048 1,073 1, Non-HR costs HR costs Cost of Sales The total expenses from the Consumer segment were EUR 1,255 million or 5.6% lower than previous year. The 2013 Cost of Sales ended 8.3% lower to reach EUR 611 million. This is the combined result of positive regulation effects, the divestment of part of The Phone House stores, as well as the benefits from a value management approach. The Consumer segment recorded EUR 349 million HR costs, 1.3% lower than for the prior year. The impact from the January 2013 inflation-based wage indexation was more than offset by the positive impact from the divestment of part of The Phone House stores. This divestment also positively impacted the non-hr costs, totalling EUR 294 million or 4.9% lower compared to Furthermore, costs were reduced through continued cost optimization efforts. The CBU full-year segment result amounted to EUR 971 million which is EUR 20 million or 2% below that of The yearon-year variance was impacted by a one-off accounting adjustment 12 and litigation provisions and a loss on disposal. Adjusted for these, the segment result was down by 5.4% from Apart from a negative impact from regulation for EUR 8 million, the segment decline was mainly driven by the pressure on the Direct Margin, partly compensated for by a lower cost base. The 2013 full-year contribution margin 13 was 43.6%. Subsidiaries: Tango & Scarlet Tango Revenue (in mio ) Tango Mobile customers (in '000) Scarlet Revenue (in mio ) For the full-year 2013, Tango, Belgacom s Luxembourgish mobile operator, continued to do well with reported revenues of EUR 127 million or an increase of 11.2% compared to This growth is driven by the good trend of smartphone sales with Tango s leading 4G subscriptions in Luxembourg and a growing customer base for quadruple play, including TV. Furthermore, over the year 2013, Tango added 9,000 customers. With Scarlet, Belgacom s multi-brand strategy in its home market started to pay off with the full-year revenue loss substantially declining versus previous years. In the last quarter of 2013, Scarlet s year-over-year evolution came to a turnaround point and progressed to a slight growth. 12 A EUR 26 million accounting adjustment was recorded in the second quarter 2012 following the passing of the new Telecom law 13 Belgacom does not apply a full cost allocation. Network and IT costs are therefore mainly centralized within SDE&W 9

180 Enterprise Business Unit - EBU Mobile disruption spill-over to business market impacting revenue and direct margin Solid growth in Mobile customer base Slow economy hampers ICT growth Regulatory price cuts significantly impacted revenue and segment result 2013 segment result totals EUR 1,023 million EBU revenues 2,501 2,421 Revenue before non-recurring items (in mio ) 2,349 2,294 2, Over the year 2013 Belgacom s professional customer segment generated EUR 2,198 million in revenue, i.e. 4.2% lower than for This decline was partly caused by regulatory 14 measures, lowering EBU s 2013 revenue by EUR 54 million or -2.3%. The remaining decline was primarily due to the disruption in the Belgian mobile market, with a substantial spill-over effect on the business market. The introduction of more abundant offers, including higher volumes of free minutes and SMSes, as well as higher data volumes, caused a significant pressure on the mobile revenue. This could not be fully compensated for by higher revenue from ICT, whose growth was hampered by a weak economy. EBU Revenue Evolution (in mio ) 2, ,198 FY 2012 Net Impact One-Offs Regulatory impact Fixed Voice Fixed Data ICT Mobile Service Revenue Terminals & Others FY Lower Mobile Termination Rates and the flow-through to Fixed-to-Mobile rates, lower Voice and Data Roaming rates 10

181 Fixed Voice revenue (in mio ) Fixed voice customers (in '000) Fixed voice ARPU (in ) ,491 1,441 1,385 1,356 1, * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units With enterprises rationalizing on their Fixed Voice lines, EBU s Fixed Voice business continued its declining trend in Over the full-year 2013, EUR 463 million was generated in Fixed Voice, or 3.8% less than for This is in part due to the lowered Fixed-to-Mobile rates, and in part to the continued erosion of Fixed Voice lines. In 2013 EBU s Fixed Voice line base eroded by 64,000 lines to a total of 1,292,000. The price changes in 2013 gave some support to the 2013 Fixed Voice ARPU 15 which slightly increased to EUR Fixed internet revenue (in mio ) Fixed internet customers (in '000) Fixed internet ARPU (in ) * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units For the full-year 2013, EBU reported EUR 380 million Fixed Data revenues, 2.1% less than for This includes revenue from Fixed Internet and data connectivity. The decline is in part due to a continued migration from older technologies to the Belgacom Explore platform, for which pricing is more favorable for customers. Furthermore, EBU ended the year 2013 with a slightly smaller customer base of 441,000 Internet customers (-0.5% year-on-year), partly offset by a 0.5% increase in ARPU to EUR 39.3, mainly driven by price adjustments. This offset the impact on ARPU from SOHO and SME customers increasingly opting for advantageous converged Packs. ICT revenue (in mio ) EBU reported EUR 701 million ICT revenue for This is EUR 9 million or 1.3% more than in 2012, in spite of an unfavorable economic climate, with customers delaying IT projects or opting for private Cloud-based solutions, triggering a shift from one-time revenue to monthly service fees Average revenue per user on a monthly basis 11

182 Mobile Service Revenue (in mio ) Mobile customers (in '000) Mobile blended ARPU (in ) ,235 1,303 1,408 1,486 1, * 2013 *Year-over-year difference differs from net add figures due to a re-segmentation exercise between the Business Units The Mobile service revenue, i.e. the combined revenue from Mobile Voice, Mobile Data and SMS, within the Enterprise Segment declined from EUR 626 million in 2012 to EUR 555 million in 2013 or -11.4%. Regulatory 16 price cuts significantly reduced the mobile revenue, with Mobile Data in particular being impacted by the capping of retail Data Roaming prices since July 2012, further reduced on 1 July In addition, EBU s Mobile Service revenue was impacted by a spill-over effect on business customers from the mobile re-pricing triggered by the new Telecom law. EBU s new Mobile pricing, supported by a recognized high-quality Mobile network, resulted in a rapid restoration of the port-in/port-out balance as of mid With an annualized Mobile churn rate of 11.9% for 2013, the churn fell even below the 12.7% mark of Mobile cards sold in a multi-play Pack did very well in 2013, and pushed the Mobile sales to a strong growth of 147,000 mobile cards, including Mobile Voice, Mobile Data and Machine-to-Machine cards. This brought the EBU Mobile customer base by end-2013 to 1,633,000 cards, up by 10% year-on-year. With mobile pricing under severe pressure, and an increasing number of Machine-to-Machine cards at low ARPU, the blended mobile ARPU amounted to EUR 29.9, down by 17.6% from the prior year. Most of the ARPU pressure, however, is caused by regulatory price cuts and the uptake of more abundant price plans, including more free Voice usage. EBU operating expenses Total expenses (in mio ) 1,269 1,209 1,164 1,181 1, Non-HR costs HR costs Cost of Sales Total The total operating expenses for the Enterprise Business Unit for 2013 totaled EUR 1,175 million, 0.5% lower compared with the previous year. This results from lower Cost of Sales and Other operating expenses, partly offset by higher HR costs. For 2013, EBU reported EUR 603 million in Cost of Sales, i.e. 2.6% less than for This results from the positive effect from lower Mobile Termination Rates, more than offsetting volume-driven commissions and SMS interconnection costs. Year-over-year the HR expenses increased by 3.9% to EUR 418 million in 2013, mainly due to a higher personnel base versus the previous year to support the increased servicing to Business customers and the migration from old to new technologies, along with the inflation-based salary indexation of January EBU segment result and contribution margin Segment result (in mio ) & margin 49.2% 50.0% 50.4% 48.5% 46.5% 1,231 1,212 1,185 1,113 1,023 EBU s segment result over the full-year 2013 totaled EUR 1,023 million, 8.1% lower compared to 2012 or 8.8% lower on a comparable 17 basis. This includes a EUR 37 million (-3.3%) negative impact from regulation. The remaining decrease was mainly driven by a lower Direct margin resulting from the pressure on Mobile Service and Fixed Voice revenue. The contribution margin 18 decreased to 46.5% in The final cut in Mobile Termination Rates (1 January 2013) and the reduced Voice and Data Roaming rates 17 Corrected for the EUR 8.1 million accounting adjustment in the second quarter 2012 following adoption of new Telecom law 18 Belgacom does not apply a full cost allocation. Network and IT costs are therefore mainly centralized within SDE&W 12

183 Service Delivery Engine & Wholesale SDE&W Revenue (in mio ) Total expenses (in mio ) Non-HR costs HR costs Cost of Sales SDE&W revenues Revenue within the SDE&W segment relates mainly to wholesale activities from Belgacom. Over the full-year 2013 the SDE&W revenues amounted to EUR 294 million, or 3.4% below those of This includes the negative effect from some regulatory 19 measures, lowering the SDE&W revenue by EUR 4 million (-1.2%) in The remaining decline is due to lower broadband volumes, partially compensated for by the commercial wholesale offer to Base and the growth in Roaming volumes which compensated for both regulated and commercial price reductions. SDE&W operating expenses Over the full-year 2013, the HR expenses totaled EUR 172 million, slightly down from the prior year. The salary indexation of January 2013 was more than compensated for by the effect from a lower headcount and more capitalized manpower resulting from increased network investments and IT development in The total non-hr expenses for the full-year 2013 totaled EUR 204 million. Besides the one-off provision reversal in the third quarter 2012, costs were up year-on-year because of the resources required for Belgacom s simplification projects. Staff & Support S&S Revenue (in mio ) Total expenses (in mio ) Non-HR costs HR costs S&S revenues The revenue from Staff & Support over the full-year 2013 totaled EUR 60 million, of which EUR 31 million was driven by capital gains recorded in the first and last quarter of These capital gains came from the sale of technical buildings as part of the network simplification project. S&S operating expenses The full-year 2013 non-hr expenses were down 7.7% from a high comparable base, driven by some unfavorable incidentals recorded in 2012 (impairment, provision for environmentally driven soil works) as well as the funding of the cost-efficiency project initiated in The HR expenses were up by 3% as a result of the inflation-based wage indexation in January 2013, partially offset by the lower headcount compared to end Regulatory impacts from Mobile Termination Rates and lowered Local Loop Unbundling and Bitstream prices 13

184 International Carrier Services BICS Revenue increase of 1.3% over 2012 Favorable destination mix to large extent offset by EU-wide MTR cuts & dollar effect Continued strong uptake of Mobile data 2013 gross margin up by 3.9% from 2012 ICS revenues 892 Revenue (in mio ) before non-recurring items 1,610 1,562 1,645 1,666 Over the full-year 2013 BICS reported EUR 1,666 million revenue, up by EUR 22 million or 1.3% compared to 2012, driven by BICS non-voice business. Revenue from the Voice business was fairly stable in relation to the previous year, as the benefit from a better destination mix was neutralized by the negative effect from European-wide MTR reductions and a disadvantageous dollar evolution ICS gross margin Gross margin (in mio ) The Gross margin over the full-year 2013 totaled EUR 254 million, a 3.9% year-on-year increase. While Voice revenues remained stable, the Voice gross margin improved by 8.2% driven by the high-margin traffic to Asia, while the MTR and dollar impacts are limited on gross margin. On the other hand, non-voice revenues were up by 12.9% whereas the Gross margin was down by 0.9% because of fierce price competition. ICS EBITDA and margin Segment result (in mio ) & margin 8.7% % 7.8% 7.8% 8.4% Driven by a higher Direct Margin and somewhat lower expenses, BICS reported over the full-year 2013 a segment result of EUR 140 million, up 8.6% from 2012, and a segment margin of 8.4% ICS Volumes ,316 Volumes (in mio ) 800 1,074 1,557 1,964 25,290 27,442 28,382 28,127 Non- Voice Voice Voice volumes were slightly down versus 2012 whereas nonvoice volumes continued to grow strongly in 2013, up by 26% from the prior year

185 QUARTERLY RESULTS AS REPORTED Group Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Restated Revenues (1) 1,588 1,611 1,620 1,644 6,462 1,586 1,583 1,568 1,582 6,318 Consumer Business Unit , ,226 Enterprise business unit , ,198 Service Delivery Engine & Wholesale Staff&Support International Carrier Services , ,666 Intersegment eliminations Costs of materials and charges to revenues , ,561 Personnel expenses and pensions , ,142 Other operating expenses EBITDA (1) , ,713 Segment EBITDA margin (1) 29.6% 27.2% 28.6% 26.1% 27.9% 27.8% 27.2% 27.3% 26.1% 27.1% Non recurring items Ebitda after non-recurring items , ,699 (1) before non-recurring items Group reported to underlying Q112 Q113 Var in % Q212 Q213 Var in % Q312 Q313 Var in % Q412 Q413 Var in % Var in % Restated Restated Restated Restated Restated GROUP - REVENUE Reported 1,588 1, % 1,611 1, % 1,620 1, % 1,644 1, % 6,462 6, % One-offs Like-for-like 1,588 1, % 1,623 1, % 1,620 1, % 1,644 1, % 6,474 6, % Regulation Underlying 1,588 1, % 1,623 1, % 1,620 1, % 1,644 1, % 6,474 6, % GROUP - EBITDA Reported % % % % 1,801 1, % One-offs Like-for-like % % % % 1,838 1, % Regulation Underlying % % % % 1,838 1, % One-offs: net impact provisions, the new Telco Law accounting adjustments in Q2'12, capital gains realised on the sale of a technical buildings, the Q3'13 (EBITDA-neutral) accounting reclassification and the loss on a disposal Regulation: includes impact from lower Mobile Termination and Roaming rates, and other regulatory impacts 15

186 Revenue evolution in percentages Q112 Q212 Q312 Q Q113 Q213 Q313 Q GROUP Reported YoY variance 0.3% -0.1% 1.5% 1.7% 0.9% -0.1% -1.7% -3.2% -3.8% -2.2% Like-for-like YoY variance 0.1% 0.8% 0.4% 0.7% 0.5% -0.8% -2.5% -3.1% -5.0% -2.9% Underlying YoY variance 1.0% 1.8% 2.7% 2.1% 1.9% 0.7% -0.6% -2.1% -4.1% -1.6% CBU EBU Reported YoY variance 2.1% -0.7% 2.8% 1.5% 1.4% -4.2% -1.5% -6.5% -4.2% -4.1% Like-for-like YoY variance 0.5% -0.8% 0.3% -1.0% -0.3% -4.2% -3.1% -5.9% -4.2% -4.4% Underlying YoY variance 1.7% 0.7% 2.8% 0.7% 1.5% -3.1% -1.8% -4.7% -3.2% -3.2% Reported YoY variance -2.2% -2.9% -2.2% -2.1% -2.3% -4.4% -3.8% -4.7% -3.8% -4.2% Like-for-like YoY variance -1.0% -0.3% -2.5% -2.4% -1.5% -4.4% -4.2% -4.7% -3.8% -4.3% Underlying YoY variance 0.1% 0.8% 1.3% -0.3% 0.4% -1.5% -0.7% -3.1% -2.4% -1.9% SDE&W Reported YoY variance -4.3% -4.9% -3.2% -5.0% -4.4% -3.0% -3.4% -2.4% -4.7% -3.4% Like-for-like YoY variance -5.1% -6.1% -4.5% -6.3% -5.5% -3.0% -3.4% -2.4% -4.7% -3.4% Underlying YoY variance -4.3% -4.9% -3.3% -5.0% -4.4% -1.8% -1.7% -1.9% -3.2% -2.1% BICS Reported YoY variance 2.6% 5.5% 5.7% 7.3% 5.3% 9.1% 0.9% 3.0% -6.8% 1.3% Like-for-like: i.e. excluding impact from M&A, the re-segmentation, the new Telco Law accounting adjustments, capital gains realised on the sale of a technical buildings, the Q3'13 accounting reclassification and litigation settlement Underlying: i.e. like-for-like excluding impact from regulatory measures Group Capex (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Group Capex Consumer Business Unit Enterprise business unit Service Delivery Engine & Wholesale Staff&Support International Carrier Services

187 CBU Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Restated Revenues , ,226 From Fixed , ,124 Voice Data TV Terminals (excl. TV) Scarlet From Mobile , ,019 Voice Data Terminals (excl. TV) Tango Other Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result Segment Contribution margin 43.7% 40.6% 44.7% 41.8% 42.7% 44.9% 42.8% 46.9% 40.0% 43.6% CBU Operationals Q112 Q212 Q312 Q Q113 Q213 Q313 Q FROM FIXED Number of access channels (thousands) 2,938 2,926 2,918 2,912 2,912 2,895 2,883 2,872 2,870 2,870 Voice 1,780 1,758 1,737 1,718 1,718 1,693 1,673 1,653 1,634 1,634 Broadband 1,159 1,169 1,181 1,193 1,193 1,203 1,210 1,219 1,235 1,235 Traffic (millions of minutes) 1,086 1, ,060 4,138 1, ,945 National , ,810 Fixed to Mobile International TV (thousands) 1,254 1,301 1,340 1,386 1,386 1,412 1,428 1,447 1,479 1,479 TV - households 1,057 1,093 1,125 1,156 1,156 1,170 1,184 1,198 1,218 1,218 of which multiple settop boxes ARPU (EUR) ARPU Voice ARPU broadband ARPU Belgacom TV FROM MOBILE Number of active customers (thousands) 3,805 3,811 3,748 3,643 3,643 3,561 3,572 3,560 3,568 3,568 Prepaid 2,116 2,071 1,992 1,923 1,923 1,815 1,733 1,684 1,640 1,640 Postpaid 1,690 1,739 1,756 1,720 1,720 1,746 1,838 1,876 1,928 1,928 Annualized churn rate (blended - variance in p.p.) 20.4% 19.9% 25.8% 36.0% 25.9% 33.3% 26.5% 26.1% 26.5% 28.0% Net ARPU (EUR) Prepaid Postpaid Blended Blended voice Blended data UoU (units) MoU (min) SMS (units)

188 EBU Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Restated Revenue , ,198 From Fixed , ,615 Voice Data Terminals ICT From Mobile Voice Data Terminals Other Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result , ,023 Segment Contribution margin 50.2% 48.3% 48.0% 47.6% 48.5% 47.0% 47.5% 45.9% 45.7% 46.5% Mobile Data - detail Adjusted* SMS Advanced data *The split between SMS and advanced Mobile Data has been adjusted due to a refinement in the allocation of data bundles. The 2012 results have been adjusted accordingly to keep a correct comparable basis. EBU- Operationals Q112 Q212 Q312 Q Q113 Q213 Q313 Q FROM FIXED Number of access channels (thousands) 1,841 1,824 1,815 1,799 1,799 1,781 1,760 1,746 1,732 1,732 Voice 1,394 1,379 1,370 1,356 1,356 1,338 1,318 1,305 1,292 1,292 Broadband Traffic (millions of minutes) , ,571 National , ,672 Fixed to Mobile International ARPU (EUR) ARPU Voice ARPU Broadband FROM MOBILE Number of active customers (thousands) 1,413 1,449 1,470 1,486 1,486 1,516 1,549 1,589 1,633 1,633 Postpaid 1,413 1,449 1,470 1,486 1,486 1,516 1,549 1,589 1,633 1,633 Annualized churn rate (blended - variance in p.p.) 11.7% 11.0% 10.8% 16.8% 12.7% 14.2% 13.6% 10.0% 10.4% 11.9% Net ARPU (EUR) Postpaid Postpaid voice Postpaid data UoU (units) MoU (min) SMS (units)

189 SDE&W Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Restated Revenues Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result SDE&W Operationals Q112 Q212 Q312 Q Q113 Q213 Q313 Q FROM FIXED Number of access channels (thousands) Voice (1) Broadband (1) FROM MOBILE Number of active Mobile customers (thousands) Retail (1) MVNO (1) i.e. Belgacom retail products sold via SDE&W (OLO's own usage and reselling) 19

190 S&S Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Restated Revenues Costs of materials and charges to revenues Personnel expenses and pensions Other operating expenses Segment result ICS Financials (EUR million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Revenues , ,666 Costs of materials and charges to revenues , ,412 Personnel expenses and pensions Other operating expenses Segment result Segment EBITDA margin 7.3% 8.4% 8.3% 7.3% 7.8% 8.3% 8.9% 8.6% 7.7% 8.4% ICS Operationals Volumes (in million) Q112 Q212 Q312 Q Q113 Q213 Q313 Q Voice 6,907 6,984 6,934 7,556 28,382 7,267 6,701 7,287 6,872 28,127 Non-Voice (SMS/MMS) , ,964 20

191 RISK MANAGEMENT This section presents an overview of the Group s Risk Management including a description of its major risks and uncertainties and its main mitigation efforts. Taking risks is inherent in doing business and successfully managing risks delivers return to Belgacom s stakeholders. Belgacom believes that risk management is fundamental to corporate governance and the development of sustainable business. The Group has adopted a risk philosophy that is aimed at maximizing business success and shareholder value by effectively balancing risk and reward. The objective of risk management is not only to safeguard the Group s assets and financial strength but also to protect Belgacom s reputation. Financial risk management objectives and policies are reported in note 33 of the consolidated financial statements, published on the Belgacom website. Risks related to important ongoing claims and judicial procedures are reported in note 35 of these statements. The Enterprise and financial reporting risks are detailed below, together with the related mitigating factors and control measures. Note that this is not intended to be an exhaustive analysis of all potential risks Belgacom might be facing. 1. Enterprise risks The Group s Enterprise Risk Management (ERM) covers the spectrum of risks ( potential adverse events ) and uncertainties that Belgacom could encounter. Belgacom ERM is a structured and consistent framework for assessing, responding to and reporting on risks that could affect the achievement of Belgacom s strategic development objectives. It seeks to maximize value for shareholders by aligning risk management with the corporate strategy, assessing the emerging risk from regulation, new technologies or the market, and developing risk tolerance and mitigating strategies. Belgacom ERM has been reviewed and updated every year since This risk assessment and evaluation takes place as an integral part of Belgacom s annual strategic planning cycle. The resulting report on major risks and uncertainties is then reviewed by the management committee, the CEO and the Audit and Compliance Committee. Among the risks identified in the ERM exercise of 2013, the following risk categories were prioritized: 1- Human resources flexibility, 2- competitive market dynamics, 3- regulatory pressure, 4- dependence on equipment and technology. Principal risks Description Mitigation actions Human resources flexibility Competitive market dynamics Regulatory pressure Dependence on equipment and technology Through a burdened HR framework, strict HR rules and unionization of personnel, Belgacom might miss the much needed flexibility to significantly reduce its workforce costs in order to preserve the company s EBITDA. A new market entrant or radical price competition could further pressure Belgacom s market share and force Belgacom into revising its pricing downwards, negatively impacting revenue and profit. Competitive behavior could prevent Belgacom to monetize investments in new technologies. Belgacom s results could be materially negatively impacted by regulatory policy changes or actions from European or national regulatory entities. Belgacom still faces a much different regulatory playing field than cable operators in Belgium. Network systems could be impacted by damage, computer viruses, natural disasters and unauthorized access which could lead to loss of business and liability claims. Part of Belgacom s nation-wide fixed access network has been in place for a long time. Ageing copper cables could increase fault rates and decrease network performance. Belgacom s human resources department is in negotiations with unions to obtain more flexibility on the company s workforce. In the meantime, Belgacom has established a simplification program aiming for increased company agility and flexibility, a lower structural need for headcount, and an improved customer service. Belgacom applies a disciplined pricing strategy, being careful not to trigger further market value destruction. It employs a multi-brand strategy to address the price-sensitive segment separately. Belgacom has other levers than price thanks to its convergence strategy and investments in a superior mobile network, providing a competitive advantage. Belgacom communicates and negotiates with the Belgian and EU regulators to try to convince them (i) not to impose unfavorable terms and conditions and (ii) to put in place a fair and balanced regulatory framework. A multi-year cyber security plan is being implemented and a dedicated Cyber Defense Unit is being created. To address the ageing copper cables, Belgacom s fixed access renewal strategy is brought in line with the future target destination of its network. Legacy systems are being replaced by integrated systems. Service and license agreements with suppliers and vendors are strictly monitored. 21

192 1.1. Limited human resources flexibility With Belgacom s revenue under pressure for the past few years, the costs of the company need to be significantly reduced in order to preserve the EBITDA. A significant part of Belgacom s expenses is driven by the costs of the workforce, whether internal or outsourced, for which the company faces a global increase that is not sustainable for the future. Through a burdened HR framework, strict HR rules and unionization of personnel, Belgacom may lack the much needed flexibility. All this at a time when business complexity is increasing, creating a need for upgraded skills and up-staffing in customer-facing functions. Moreover, Belgium applies automatic inflation-based salary increases, leading to higher costs, not only of Belgacom s own employees but also of the outsourced workforce, with the outsourcing companies being subject to the indexation as well. On a Belgacom Group level, about one in three employees are statutory, benefitting from substantially higher protection against dismissal than that applicable to private sector employees. This may restrict Belgacom s ability to improve efficiency and increase flexibility to levels comparable to those of its competitors. To address the much needed structural measures, Belgacom s human resources department is in negotiations with the unions. The aim of these negotiations is to obtain more flexibility to move employees within the organization, adapt the workforce faster in line with the actual workload and align remuneration items with common market practices. Belgacom has established a comprehensive simplification program aiming for increased agility and flexibility, a lower structural need for headcount, and improved customer service. The simplification project will prepare the company for the coming wave of retiring employees (over the timeframe), minimizing the need for replacement by developing strategic workforce planning, fluent mobility and drastically simplifying and/or automating Belgacom s product and services, processes, systems and organization Competitive market dynamics Belgacom s business is mainly focused on Belgium, a small country with only a few large telecom players, among which Belgacom is the incumbent. Belgacom is operating in maturing, and, according to some, even saturating markets. In such circumstances, market value is vulnerable to disruptive behavior among competitors. Moreover, Belgacom s main competitors Mobistar, BASE and Telenet, are subsidiaries of France Telecom, KPN, and Liberty Global respectively, all large international operators. Regarding TV services, Belgacom plays a challenger role, facing strong cable competition. A new market entrant or radical price competition could cost Belgacom market share and negatively impact revenue and profit. For instance, Belgium s new Telecom Law, applicable since 1 October 2012 and indicated as one of the primary risks in the Risk Management chapter of the 2012 annual report, resulted in a significant increase in Mobile customer churn. This, combined with aggressive competitor mobile pricing (in both retail and wholesale), forced Belgacom to revise its mobile pricing offer at the end of 2012 and in April 2013, greatly increasing the value for customers for similar monthly price commitments. With churn levels normalizing in 2013 and mobile customer net additions back to positive, Belgacom applies a disciplined customer pricing strategy, being careful not to trigger further market value destruction. In case of market share loss due to a significant further reduction of competitor prices, however, Belgacom could be forced to revise its mobile pricing plans accordingly, which might result in additional pressure on mobile revenue. Nevertheless, as a result of its long-term strategy and continued network investments, Belgacom build itself an advantageous competitive position providing the company with other levers than just price. Belgacom offers mobile services on a superior mobile network, and its convergence strategy provides the company with a solid ground to compete, offering attractive multi-play solutions to its customers while reducing churn. Another differentiator for Belgacom is to take the lead in mobile innovation. In this regard, it was the first operator to launch 4G in Belgium, ending 2013 with 258 cities and municipalities covered, or 50% of Belgium s population. Belgacom intends to get a decent return on its investments by introducing speed-tiering of its mobile price plans. This translates in making the full speed capabilities of the 4G technology accessible only via its high-end mobile price packages. Subscribers to the mid- and low-end mobile offers and having a 4G-enabled device will also enjoy higher speeds, though will be capped at 20Mbps. The monetization of 4G, however, could become challenging should competitors decide to offer full 4Gcapabilities free of charge to all customers. Belgacom would then risk not being able to profit from the expensive investments made. In the fixed market, Belgacom faces strong competition from the cable operators. Potential consolidation among cable operators or between cable and mobile network operators could further strengthen competitors positions and open the cable network for new players. Substitution of fixed line services (e.g. by apps and social media like Skype, Facebook, etc.), TV content (such as Bhaalu, Stievie and Netflix in the future) could put further pressure on revenues and margins. Belgacom is responding to these threats through a convergent and bundled approach and by offering new services (e.g. TV Replay, Belgacom Cloud, Smart and Safe Living). 22

193 To preserve its Fixed and Mobile premium brands, Belgacom is applying a multi-brand strategy, addressing the pricesensitive segment via its subsidiary Scarlet. The latter offers attractively priced mobile and triple-play products. In the SME market, besides the competitors also active in the Consumer market, we also face competition from niche players in the different product markets. Belgacom remains a reference in this market through its convergent offers, mixing fixed and mobile, as well as telecom and IT. In the large-company market, Belgacom faces competition from internationally oriented operators like Orange Business Services, Colt, Verizon Business and BT Belgium and from integrators such as Dimension Data, Getronics, Cegeka and RealDolmen. The scattered competitive landscape drives price competition, and might further impact revenue and margins. In the international carrier services market, voice margins per minute have been under significant pressure over the past few years as a result of price competition, consolidation of competitors and the ease with which customers are able to change providers. If pressure on voice margins should continue and/or if the Group does not offset price decreases with increased volume, Belgacom s ICS growth rate, operating revenue and net profit could come under pressure. In addition, the pressure on the mobile data market might increase and therefore affect the growth profile of the International Carrier Services Regulatory pressure Belgacom operates in highly regulated markets, limiting the flexibility to manage its business. Belgacom s results could be materially negatively impacted by regulatory policy changes or actions from European or national regulatory entities. Among other things, the Group s revenue and profit could be affected by increased taxation, additional roaming regulation, additional consumer regulation and wholesale regulation. Current wholesale prices do not reflect the economic value of the underlying network assets. This could negatively affect the profitability of asset renewal (re-investments) and investments in next-generation networks. Belgacom still faces a much different regulatory playing field than its main competitors for fixed services, i.e. the regional cable operators. This provides them with a competitive advantage that distorts fair competition and that may negatively affect Belgacom s ability to compete for market share. Belgacom communicates and negotiates with the Belgian and EU regulators, either personally or through trade associations such as ETNO and GSMA, to try to convince these authorities (i) not to impose unfavorable terms and conditions and (ii) to put in place a fair and balanced regulatory framework promoting investments and establishing a level playing field with the cable operators. Belgacom also develops sound regulatory cost models to defend its pricing vis-à-vis the regulators. Ultimately, Belgacom challenges unfavorable and unfair decisions before the courts Dependence on equipment and technology Belgacom s business is highly dependent on technical infrastructure such as telecommunication equipment and IT platforms. Belgacom is able to deliver services only insofar as it can protect its network systems against damage from telecommunication failures, computer viruses, natural disasters and unauthorized access. Any system failure, incident, or security breach that causes interruptions to all or some of Belgacom s operations could impair its ability to provide services to its customers and could potentially have financial consequences and a reputation impact. To mitigate the risks related to incidents (e.g. fire) affecting technical buildings, Belgacom has spread its technology across different locations and buildings (e.g. 3 data centers, splitting corporate ICT services and customer ICT services), 10 network services nodes and hundreds of local exchanges. To ensure the security of its IT and telecom systems, a new multi-year cyber security plan is being implemented to allow more effective detection and remediation of cyber attacks. This new cyber security plan entails a wide range of actions consisting of: best-in-class security of IT platforms and networks for improved prevention; the creation of a Cyber Defense Unit exclusively devoted to detecting and solving cyber incidents; organizational measures and governance and the development of a more cyber-security-oriented culture and awareness towards the internal organization as well as towards partners, vendors and suppliers. Belgacom s service portfolio becomes increasingly dependent on numerous IT platforms. To preserve the quality of service delivered to its customers, Belgacom needs to guarantee stability, processing time and agility. Any disruption or security breach resulting in loss or damage to customers data or applications, or leading to inappropriate disclosure of confidential information, may lead to Belgacom incurring liability. In addition, the Group may incur additional costs to remedy the damage caused by these disruptions or security breaches. Belgacom possesses errors and omissions insurance, business interruption insurance and insurance specifically aimed to protect against certain losses resulting from, for instance, computer viruses and security breaches. For critical IT applications, an extensive resilience plan has been put in place in 2013 which allows complete segregation and substantially better disaster recovery capabilities in case of failures. Furthermore, to prevent problems in the supply chain, Belgacom monitors strictly its service and license agreements with suppliers and vendors. 23

194 Belgacom has a nation-wide fixed access network, part of which has been in place for a long time, the so-called legacy copper network. Ageing copper cables could increase fault rates and decrease performance, which could require additional copper replacement. To remedy this, Belgacom is bringing its renewal strategy in line with the target destination of its network. The mobile network might be subject to technical failures, affecting the quality of service or causing temporary service interruptions, leading to customer dissatisfaction. Elaborate network resilience programs have been put in place to further boost the ability to keep the network in operation in the event of failures. Belgacom continues to invest in stability improvements for both its fixed and mobile network by putting new technologies and architectures in place that enable higher redundancy (e.g. 4G, Vectoring, etc.). Belgacom also focuses on simplifying its legacy network through an elaborate network transformation program, although this could be subject to delayed implementation and consequently delayed savings from the out-phasing of technical buildings. Nonetheless, in the event of network or IT interruptions, Belgacom has multiple measures in place to remedy problems as quickly as possible. Firstly, Belgacom has an extensive monitoring center in place allowing very fast detection and identification of any problem that could jeopardize the proper functioning of operations. Secondly, Belgacom has elaborate, well-prepared procedures in place to deal with and remedy high-impact incidents as quickly as possible through Emergency Response Teams which operate 24/7 and include the best experts in their fields. 2. Financial reporting risks In the area of financial reporting, in addition to the general enterprise risks also impacting the financial reporting (e.g. personnel), the major risks identified include: new transactions and evolving accounting standards, changes in tax law and regulations, and the financial statement closing process New transactions and evolving accounting standards New transactions could have a significant impact on the financial statements, either directly in the financial statements or in the notes. An inappropriate accounting treatment could result in financial statements which do not provide a true and fair view any more. Changes in legislation (e.g. pension age, customer protection) could also significantly impact the financials. New accounting standards can require the gathering of new information and the adaption of complex (billing) systems. If not timely and adequately foreseen, the timeliness and reliability of the financial reporting could be put at risk. It is the responsibility of the Corporate Accounting department to follow the evolution in the area of evolving standards (both local GAAP and IFRS). Changes are identified, and the impact on the Belgacom financial reporting is proactively analysed. For every new type of transaction (e.g. new product, new employee benefit, business combination), an in depth analysis from a financial reporting, risk management, treasury and tax point of view is performed. In addition, the development requirements for the financial systems are timely defined and compliance with internal and external standards is systematically analysed. Emphasis is on the development of preventive controls and setting up reporting tools that enable posteriori controls. On a regular base, the Audit and Compliance Committee (A&CC) and the Management Committee are informed about new upcoming financial reporting standards and their potential impact on the Belgacom Group financials Changes in tax law and regulations Changes in tax laws and regulations (corporate income tax, VAT...) or in their application by the tax authorities could significantly impact the financial statements. To ensure compliance, it is often required to set up, in a short timeframe, additional administrative processes to collect relevant information or to implement updates to existing IT systems (e.g. billing systems). The tax department continuously follows potential changes in tax law and regulations as well as interpretations of existing tax laws by the tax authorities. Based on laws, doctrine, case law and political statements as well as draft laws available etc., an impact analysis is made from a financial perspective from an operational point of view. 24

195 2.3. Financial statement closing process The delivery of timely and reliable financial statements remains dependent on an adequate financial statement closing process. Clear roles and responsibilities in the closing process of the group financial statements have been defined. During the monthly, quarterly, half-yearly and annual financial statement closing processes, there is a continuous monitoring on the different steps. In addition, different controls are performed to ensure quality and compliance with internal and external requirements and guidelines. For Belgacom and its major affiliates, a very detailed closing calendar is established, which includes in detail crossdivisional preparatory meetings, deadlines for ending of specific processes, exact dates and hours when IT sub-systems are locked, validation meetings and reporting deliverables. For every process and sub-process, different controls are performed, including preventive controls, where information is tested before being processed, as well as detective controls, where the outcome of the processing is being analysed and confirmed. Specific attention is given to reasonableness tests, where financial information is being analysed against more underlying operational drivers, and coherence tests, where financial information from different areas is brought together to confirm results or trends, etc Tests on individual accounting entries are performed for material or non-recurrent transactions and on a sample basis for others. The combination of all these tests provides sufficient assurance on the reliability of the financials. INTERNAL CONTROL SYSTEM The Belgacom Board of Directors is responsible for the assessment of the effectiveness of the systems for internal control and risk management. Belgacom has set up an internal control system based on the COSO model of 1992, i.e. the integrated internal control and enterprise risk management framework published by the Committee of Sponsoring Organisation of the Treadway Commission ( COSO ) in This COSO methodology is based on five areas: the control environment, risk analysis, control activities, information & communication and monitoring. Belgacom s internal control system is characterized by an organization with a clear definition of responsibilities, next to sufficient resources and expertise, and also appropriate information systems, procedures and practices. Obviously, Belgacom cannot guarantee that this internal control will be sufficient in all circumstances as risks of misuse of assets or misstatements can never be totally eliminated. However, Belgacom organizes a continuous review and follow-up of all the components of its internal controls and risk management systems to ensure they remain adequate. Belgacom considers the timely delivery to all its internal and external stakeholders of complete, reliable and relevant financial information in conformity with International Financial Reporting Standards (IFRS) and with other additional Belgian disclosure requirements as an essential element of management and governance. Therefore, Belgacom has organized its internal control and risk management systems over its financial reporting in order to ensure this objective is met. 1. Control environment 1.1. Organization of internal control In accordance with the bylaws, Belgacom has an Audit and Compliance Committee (A&CC), which consists of five nonexecutive Directors, the majority of whom must be independent. In line with its charter, it is chaired by an independent Director. The members of the A&CC have sufficient expertise in financial matters to discharge their functions. Its Chairman, Mr. Pierre-Alain De Smedt, is competent in accounting and auditing. He is a licentiate in commercial and financial sciences. He occupied during his career several functions as CFO, CEO and COO. Amongst his non-executive functions he is also member of the Audit Committee of Avis Europe. The A&CC s role is to assist and advise the Board of Directors in its oversight on (i) the financial reporting process, (ii) the efficiency of the systems for internal control and risk management of Belgacom, (iii) the Belgacom s internal audit function and its efficiency, (iv) the quality, integrity and legal control of the statutory and the consolidated financial statements of Belgacom, including the follow up of questions and recommendations made by the auditors, (v) the relationship with the Group s auditors and the assessment and monitoring of the independence of the auditors, (vi) Belgacom s compliance with legal and regulatory requirements, (vii) the compliance within the organization with the Belgacom s Code of Conduct and the Dealing Code. The A&CC meets at least once every quarter. 25

196 1.2. Ethics The Board of Directors has approved a Corporate Governance Charter and a Code of Conduct The way we do responsible business. All employees must perform their daily activities and their business objectives according to the strictest ethical standards and principles, using the Group values (Respect, Can do and Passion) as guiding principle. The Code The way we do responsible business, which is available on sets out the abovementioned principles, and aims to inspire each employee in his or her daily behaviour and attitudes. The ethical behaviour is not limited to the text of the Code. The Code is a summary of the main principles and is thus not exhaustive. In addition, Belgacom in general and the Finance department in particular have a tradition of a high importance to compliance and a strict adherence to a timely and qualitatively reporting Policies and procedures The principles and the rules in the Code The way we do responsible business are further elaborated in the different internal policies and procedures. These Group policies and procedures are available on the Belgacom intranet-sites. Every policy has an owner, who regularly reviews and updates if necessary. Periodically, and at moment of an update, an appropriate communication is organized. In the financial reporting domain, general and more detailed accounting principles, guidelines and instructions are summarized in the accounting manuals and other reference material available on the Belgacom intranet-sites. In addition, the Corporate Accounting department regularly organizes internal accounting seminars to update finance and nonfinance staff on accounting policies and procedures Roles & responsibilities Belgacom s internal control system benefits from the fact that throughout the whole organization, roles and responsibilities are clearly defined. Every business unit, division and department has its vision, mission and responsibilities, while on individual level everybody has a clear job description and objectives. The main role of the Finance Division is to support the divisions and affiliates by providing accurate, reliable and timely financial information for decision making, to monitor the business profitability and to manage effectively corporate financial services. The establishment of the external financial reporting falls under the responsibility of the Corporate Accounting department. The team of the Corporate Accounting department assumes this accounting responsibility for the mother company Belgacom and the major Belgian companies. They also provide the support to the other affiliates. For this centralized support, the organization is structured according to the major (financial) processes. These major processes include capital expenditures and assets, inventories, contracts in progress & revenue recognition, financial accounting, operational expenditures, provisions & litigations, payroll, post-employment benefits and taxes. This centralized support organized around specific processes and IFRS standards allows for in depth accounting expertise and ensures compliance with group guidelines. The consolidation of all different legal entities into the Consolidated Financial Statements of the Belgacom Group is realized centrally. The Consolidation department defines and distributes information relating to the implementation of accounting standards, procedures, principles and rules. It also monitors changes in regulations to ensure that the financial statements continue to be prepared in accordance with IFRS, as adopted by the European Union. The monthly instructions for consolidation set forth not only the schedules for preparing accounting information for reporting purposes, but also includes detailed deadlines and items requiring particular attention, such as complex issues or new internal guidelines Skills & expertise Adequate staffing is a matter to which Belgacom pays careful attention. This requires not only sufficient headcount, but also the adequate skills and expertise. These requirements are taken into account in the hiring process, and subsequently in the coaching and formation activities, facilitated and organized by the Belgacom Corporate University. For financial reporting purposes, a specific formation cycle was put in place, whereby junior as well as senior staff have to participate mandatory. These internally and externally organized accounting seminars cover not only IFRS but local accounting rules & regulations, Tax and Company law & regulations as well. In addition, the knowledge and expertise is also kept up to date and extended for more specific domains for which staff is responsible (revenue assurance, pension administration, financial products, etc.) through attendance to seminars and self-study. Furthermore, employees also attend general formations session on Belgacom new business products & services. 26

197 2. Risk analysis Major risks and uncertainties are reported in the caption Risk Management. 3. Risk mitigating factors and control measures Mitigating factors and control measures are reported in the caption Risk Management. 4. Information and communication 4.1. Financial reporting IT systems The accounting records of Belgacom and most of its affiliates are kept on large integrated IT systems. Operational processes are often integrated in the same system (e.g. supply chain management, payroll). For the billing systems, which are not integrated, adequate interfaces and a monitoring system have been developed. For the consolidation purposes, a specific consolidation tool is used. The organizational set-up and access management are designed to support an adequate segregation of duties, prevent unauthorized access to the sensitive information and prevent unauthorized changes. The set-up of the system is regularly subject to the review by the internal audit department or external auditors Effective Internal communication Most of the accounting records today are kept under IFRS as well as local GAAP. In general, financial information delivered to management and used for budgeting, forecasting and controlling activities is established under IFRS. A common financial language used throughout the organization positively contributes to an effective and efficient communication Reporting and validation of the financial results The financial results are internally reported and validated on different levels. On the level of processes, there are validation meetings with the business process owners. On the level of the major affiliates, a validation meeting is organized with the accounting and controlling responsible. On Belgacom group level, the consolidated results are split per segments. For every segment, the analysis and validation usually includes comparison with historical figures, as well as budget-actual and forecast-actual analysis. Validation requires (absences of) variances to be analyzed and satisfactorily explained. Afterwards, the financial information is reported and explained to the Belgacom Management Committee (monthly) and presented to the A&CC (quarterly). 5. Supervision and assessment of internal control The effectiveness and efficiency of the internal control are regularly assessed in different ways and by different parties: Each owner is responsible for reviewing and improving its business activities on a regular basis: this includes a.o. the process documentation, reporting on indicators and monitoring of those. In order to have an objective review and evaluation of the activities of each organization department, Belgacom s Internal Audit department conducts regular audits across the Group s operations. The independence of Internal Audit is ensured via its direct reporting line to the Chairman of the A&CC. Audit assignments performed may have a specific financial processes scope but will also assess the effectiveness and efficiency of the operations and the compliance towards the applicable laws or rules. The A&CC reviews the quarterly interim reporting and the specific accounting methods. The main disputes and risks facing the Group are considered; the recommendations of internal audit are followed-up; the compliance within the Group with the Code of Conduct and Dealing Code is regularly discussed. Except for some very small foreign affiliates, all legal entities of the Belgacom Group are subject to an external audit. In general, this audit includes an assessment of the internal control, and leads to an opinion on the statutory financials and on the (half-yearly and annual) financials reported to Belgacom for consolidation. In case the external audit reveals a weakness or identifies opportunities to further improve the internal control, recommendations are made to management. These recommendations, the related action plan and implementation status are at least annually reported to the A&CC. 27

198 OTHER INFORMATION Rights, commitments and contingencies as of 31 December 2013 Disclosures related to rights, commitments and contingencies are reported in note 35 of the consolidated financial statements. Use of financial instruments Disclosures related to the use of financial instruments are reported in note 33 of the consolidated financial statements. Circumstances which may considerably impact the development of the Group Circumstances which may considerably impact the development of the Group are reported in the sections Risk Management and Internal Control of this management report. Research and development activities In general, the research and development activities cover 4 key steps in the adoption cycle of a technology or of a service based on technology: Study of the technology s potential: determination of the technological and commercial opportunities and its positioning in the technology portfolio; Introduction of the technology: as the technology is selected, an engineered solution is necessary for deployment, exploitation and day-to-day management; Evolution of the technology: once deployed, the technology will continue to evolve in accordance with its potential and market demand; The preparation of the introduction of new services. In 2013, the research and development activities covered the following: Study of the potential of new technologies: o o o o o o o o o Further detailed studies on solutions to phase out traditional technologies and to migrate to a fully IP based network. More specifically the solutions for replacing PSTN and ISDN (Access Gateway, ISDN Access Devices and alternatives) were further investigated on their technical, economical and operational feasibility. Study to define future target transport network architectures and supporting technologies, aiming to cope with disruptive traffic growth, higher resiliency, as well as backbone network simplification. Further studies for the introduction of IPv6 in the data networks. Fibre to the Home (FTTH): technical-economic studies have been further conducted and preparations continued to deploy FTTH in green-field zonings. A first pilot for fibre-based connections in a new zoning was realized in the town of Brecht. A study has been started to investigate the potential of deploying fibre closer to the homes, by re-using the last meters of the existing copper pair for connecting the home (solution based on G.Fast standards). Investigation on viable solutions to optimize the data traffic handling on fixed and mobile networks, in order to ensure the optimal Quality of Service. Belgacom started to investigate the capabilities of the newest video coding solutions (HEVC / H265 video coding). Belgacom started also to investigate the potential of the integration of WiFi technology with the mobile data network to always deliver best data experience. Belgacom has a continuous focus on the Green aspect. With green ICT and ICT for green, Belgacom actively participates in reducing our own environmental impact, as well as the impact of others. Several areas are being investigated (e-prescription, smart grids...). Introduction of new technologies: o o Belgacom introduced in its mobile network the latest evolution in the 3G technology (HSPA+ or 3G+ ) which doubles the average download speed and increases significantly the upload speed for devices supporting this evolution. Belgacom and Alcatel-Lucent have been further developing in a partnership a next step in VDSL2 technology ( Vectoring ). This solution allows for cancelling out interference in a copper cable and will allow increasing substantially the data speed that can be offered. A new modem ( Bbox3 ) that supports this Vectoring solution has been developed and introduced. 28

199 Evolution of the technology in terms of improvement and existing services extension: o o o o Belgacom further improved and extended its portfolio on Cloud-based Services with a residential cloud solution (storage and sharing). Belgacom extended its internet-of-things services with the introduction of Home Control/View (multidevice view, alert and interaction with home devices). Belgacom TV services have been further enriched. A new decoder has been developed and a faster application for TV Everywhere has been made available. TV Replay, a totally new service, has been introduced, allowing customers to watch TV programs at the moment which is most convenient for them. The download speed on VDSL2 has been further increased (up to 50 Mbps) by further improving DLM ( Dynamic Line Management ), a technology which was developed in-house. The preparation of the introduction of new services: o Belgacom was one of the main participants in the fiber-based pilot network in Kortrijk, in which test users are provided with high-speed access. This Living Lab enables application developers to test new applications and services in a real-life environment with a representative number of test users. Belgacom has also been testing some advanced services. Belgacom collaborates with universities, industrial partners and several other bodies, such as iminds (independent research institute founded by the Flemish government), and I.W.T. (Agentschap voor Innovatie door Wetenschap en Technologie). In this way, Belgacom has been participating to several R&D programs in various domains. Belgacom takes also part in several User Committees for Strategic Research projects. Treasury shares Disclosures related to treasury shares are reported in note 17 of the consolidated financial statements. Capital management The purpose of the Group s capital management is to maintain net financial debt and equity ratios that allow for security of liquidity at all times via flexible access to capital markets, in order to be able to finance strategic projects and to offer an attractive remuneration to shareholders. The latter was last updated by the Belgacom Board of Directors on 25 February Since then Belgacom has committed to return, in principle, most of its annual consolidated cash flow before financing activities (or Free Cash Flow ), to its shareholders. However, the return of such free cash flow either through dividends or share buybacks, is being reviewed on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective merger and acquisition projects, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves. Over the two periods presented, the Group didn t issue new shares or any other dilutive instrument. Post-balance sheet events Disclosures related to post-balance sheet events are reported in note 40 of the consolidated financial statements. On behalf of the Board of Directors, Brussels, February 27, 2014 Leroy Dominique President & CEO De Clerck Stefaan Chairman of the Board of Directors 29

200 CONSOLIDATED FINANCIAL STATEMENTS Prepared under International Financial Reporting Standards for each of the two years ended 31 December 2013 and 2012 Consolidated balance sheet Consolidated income statement Consolidated statement of other comprehensive income Consolidated statement of cash flows Consolidated statement of changes in equity Notes to the consolidated financial statements Note 1. Corporate information Note 2. Significant accounting policies Note 3. Goodwill Note 4. Intangible assets with finite useful life Note 5. Property, plant and equipment Note 6. Investments in subsidiaries, joint ventures and associates Note 7. Other participating interests Note 8. Income taxes Note 9. Assets and liabilities for pensions, other post-employment benefits and termination benefits Note 10. Other non-current assets Note 11. Inventories Note 12. Trade receivables Note 13. Other current assets Note 14. Investments Note 15. Cash and cash equivalents Note 16. Assets classified as held for sale Note 17. Equity Note 18. Interest-bearing liabilities Note 19. Provisions Note 20. Other non-current payables Note 21. Other current payables Note 22. Net revenue Note 23. Other operating income Note 24. Non-recurring income Note 25. Costs of materials and services related to revenue Note 26. Personnel expenses and pensions Note 27. Other operating expenses Note 28. Non-recurring expenses Note 29. Depreciation and amortization Note 30. Net finance income / (costs) Note 31. Earnings per share Note 32. Dividends paid and proposed Note 33. Additional disclosures on financial instruments Note 35. Rights, commitments and contingent liabilities Note 36. Share-based Payment Note 37. Relationship with the auditors Note 38. Segment reporting Note 39. Recent IFRS pronouncements Note 40. Post balance sheet events Auditor s report

201 CONSOLIDATED BALANCE SHEET As o f 31 D ecemb er (EUR millio n ) No te 01/01/ res ta ted res ta ted ASSETS NON-CURRENT ASSETS 6,238 6,192 6,254 Goodwill 3 2,323 2,339 2,320 Intangible assets with finite useful life 4 1,155 1,097 1,185 Property, plant and equipment 5 2,401 2,467 2,558 Investments in associates Other participating interests Deferred income tax assets Other non-current assets CURRENT ASSETS 2,095 2,051 2,163 Inventories Trade receivables 12 1,328 1,341 1,289 Current tax assets Other current assets Investments Cash and cash equivalents Assets classified as held for sale TOTAL ASSETS 8,332 8,243 8,417 LIAB ILITIES AND EQUITY EQUITY 17 3,227 3,09 3 3,042 Sha reho lders ' equity 17 3,003 2,881 2,846 Issued capital 1,000 1,000 1,000 Treasury shares Restricted reserve Remeasurement reserve Stock compensation Retained earnings 2,458 2,377 2,310 Foreign currency translation No n -Co ntro lling interes ts NON-CURRENT LIAB ILITIES 2,845 2,678 2,865 Interest-bearing liabilities 18 1,931 1,761 1,950 Liability for pensions, other post-employment benefits and termination benefits Provisions Deferred income tax liabilities Other non-current payables CURRENT LIAB ILITIES 2,260 2,472 2,511 Interest-bearing liabilities Trade payables 1,343 1,310 1,320 Tax payables Other current payables Liabilities associated with assets classified as held for sale TOTAL LIAB ILITIES AND EQUITY 8,332 8,243 8,417 32

202 CONSOLIDATED INCOME STATEMENT Yea r en d ed 31 D ecemb er (EUR millio n ) No te res ta ted Net revenue 22 6,415 6,239 Other operating income To ta l inco me 6,462 6,318 Costs of materials and services related to revenue 25-2,611-2,561 Personnel expenses and pensions 26-1,126-1,142 Other operating expenses Non-recurring expenses To ta l o p era ti n g exp en s es b efo re d ep reci a ti o n a n d a mo rti za ti o n -4,6 76-4,6 19 Op era ti n g i n co me b efo re d ep reci a ti o n a n d a mo rti za ti o n 1,786 1,6 9 9 Depreciation and amortization Opera ting inco me 1, Finance income Finance costs Net finance costs In co me b efo re ta xes Tax expense Net inco me Non-controlling interests Net income (group share) Basic earnings per share (in EUR) EUR 1.98 EUR Diluted earnings per share (in EUR) EUR 1.98 EUR Weighted average nb of outstanding ordinary shares ,011, ,759,360 Weighted average nb of outstanding ordinary shares for diluted earnings per share ,688, ,987,711 33

203 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME Yea r en d ed 31 D ecemb er (EUR millio n ) res ta ted Net inco me Other co mp rehen s i ve i n co me: Items tha t ma y b e recla s s i fi ed to p ro fi t a n d lo s s Cash flow hedges Gain/(loss) taken to equity 1-5 Transfer to profit or loss for the period 0 1 Exchange differences on translation of foreign operations -1-1 To ta l b efo re rela ted ta x effects -1-5 Rela ted ta x effects Cash flow hedges: Gain/(loss) taken to equity 0 2 In co me ta x rela ti n g to i tems tha t ma y b e recla s s i fi ed 0 1 Items tha t ma y b e recla s s i fi ed to p ro fi t a n d lo s s - n et o f rela ted ta x effects -1-3 Items tha t wi ll n o t b e recla s s i fi ed to p ro fi t a n d lo s s Remeasurement of defined benefit obligations To ta l b efo re rela ted ta x effects Rela ted ta x effects Remeasurement of defined benefit obligations 11-6 In co me ta x rela ti n g to i tems tha t wi ll n o t b e recla s s i fi ed 11-6 Items tha t wi ll n o t b e recla s s i fi ed to p ro fi t a n d lo s s - n et o f rela ted ta x effects To ta l co mp rehen s i ve i n co me Attributable to: Equity holders of the parent Non-controlling interests

204 CONSOLIDATED STATEMENT OF CASH FLOWS Yea r en d ed 31 D ecemb er (EUR millio n ) No te res ta ted Ca s h flo w fro m o p era ti n g a cti vi ti es Net income (group share) Adjustments for: Non-controlling interests Depreciation and amortization on intangible assets and property, plant and equipment 4& Increase of impairment on goodwill, intangible assets and property, plant and equipment 3/4/ Increase of provisions 40 1 Deferred tax expense Increase of impairment on participating interests 27 1 Fair value adjustments on financial instruments Loans amortization 5 4 Gain on disposal of associates Gain on disposal of property, plant and equipment Other non-cash movements 9 5 Op era ti n g ca s h flo w b efo re wo rki n g ca p i ta l cha n g es 1,5 47 1,447 Increase in inventories Decrease / (increase) in trade receivables Decrease in current income tax assets 2 2 Decrease / (increase) in other current assets 11-9 Increase / (decrease) in trade payables Increase / (decrease) in income tax payables Increase in other current payables Decrease in net liability for pensions, other post-employment benefits and termination benefits Decrease in other non-current payables and provisions In crea s e i n wo rki n g ca p i ta l, n et o f a cq u i s i ti o n s a n d d i s p o s a ls o f s u b s i d i a ri es Net ca s h flo w p ro vi d ed b y o p era ti n g a cti vi ti es (1) 1,48 0 1,319 Ca s h flo w fro m i n ves ti n g a cti vi ti es Cash paid for acquisitions of intangible assets and property, plant and equipment 4& Cash paid for acquisitions of other participating interests and joint ventures -4-6 Cash paid for acquisition of consolidated companies, net of cash acquired Cash received from sales of intangible assets and property, plant and equipment 7 38 Net cash received from other non-current assets 3 5 Net ca s h u s ed i n i n ves ti n g a cti vi ti es Ca s h flo w b efo re fi n a n ci n g a cti vi ti es Ca s h flo w fro m fi n a n ci n g a cti vi ti es Dividends paid to shareholders Dividends paid to non-controlling interests Net sale of treasury shares Net (purchase) / sale of investments Variation in equity -3-6 Repayment of vendor financing 0-7 Issuance of long term debt Repayment of long term debt Issuance of short term debt Net ca s h u s ed i n fi n a n ci n g a cti vi ti es Net i n crea s e / (d ecrea s e) o f ca s h a n d ca s h eq u i va len ts Cash and cash equivalents at 1 January Cash and cash equivalents at 31 December (1) Net cash flow from operating activities includes the following cash movements : Interest paid Interest received 3 2 Income taxes paid

205 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (EUR mi lli o n ) Is s u ed ca p i ta l Trea s u ry s ha res (TS) Res - tri cted res erve Remea - s u remen t res erve Fo rei g n cu rren cy tra n s - la ti o n Sto ck Co mp en - s a ti o n Reta i n ed Ea rn i n g s Sha reho l- d ers ' Eq u i ty No n - co n tro l- li n g i n teres ts (NCI) To ta l Eq u i ty Balance at 1 January , ,532 3, ,303 Remeasurement defined benefit obligations Balance at 1 January 2012 (restated ) ,227 Remeasurement defined benefit obligations Other comprehensive income Net income Total comprehensive income Dividends to shareholders (relating to 2011) Interim dividends to shareholders (relating to 2012) Dividends of subsidiaries to non-controlling interests Treasury shares (TS) Exercise of stock options Sale of TS under a discounted share purchase plan Stock options Stock options granted and accepted Deferred stock compensation Amortization deferred stock compensation Exercise of stock options Total transactions with equity holders Balance at 31 December 2012 (restated ) 1, ,377 2, ,093 Cash flow hedges - gain/(loss) taken to equity Currency translation differences Remeasurement defined benefit obligations Other comprehensive income Net income Total comprehensive income Dividends to shareholders (relating to 2012) Interim dividends to shareholders (relating to 2013) Dividends of subsidiaries to non-controlling interests Treasury shares (TS) Exercise of stock options Sale of TS under a discounted share purchase plan Stock options Amortization deferred stock compensation Exercise of stock options Total transactions with equity holders Balance at 31 December , ,310 2, ,042 36

206 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 1. Corporate information The consolidated financial statements at 31 December 2013 were authorized for issue by the Board of Directors on February 27, They comprise the financial statements of Belgacom SA, its subsidiaries and joint ventures (hereafter the Group ) as well as the Group s interest in associates accounted for under the equity method. Belgacom SA is a Limited Liability Company of Public Law registered in Belgium. The transformation of Belgacom SA from Autonomous State Company into a Limited Liability Company of Public Law was implemented by the Royal Decree of 16 December Belgacom SA headquarters are located at Boulevard du Roi Albert II, Brussels, Belgium. As from 1 January 2008 onwards, the Board of Directors, the Chief Executive Officer and the Belgacom Management Committee manage the operations of the Belgacom Group based on the customer-oriented organization structured around the five following reportable operating segments: The Consumer Business Unit (CBU) sells voice products and services, internet and television, both on fixed and mobile networks, to residential customers, mainly on the Belgian market; The Enterprise Business Unit (EBU) sells ICT services and products to professional customers, whether they are self-employed persons, small companies or major corporations. These ICT solutions, including telephone services, are marketed mainly under the Belgacom, Proximus and Telindus brands, on both the Belgian and international markets; The Service Delivery Engine & Wholesale (SDE&W) centralizes all the network and IT services and costs (excluding costs related to customer operations and to the service delivery of ICT solutions), provides services to CBU and EBU and sells these services to other telecom and cable operators; International Carrier Services (ICS) is responsible for international carrier activities; Staff and Support (S&S) brings together all the horizontal functions (human resources, finance, legal, strategy and corporate communication), internal services and real estate that support the Group s activities. Further information concerning the operating segments is included under note 38. The number of employees of the Group (in full time equivalents) amounted to 15,699 at 31 December 2013 and 15,859 at 31 December For the year 2013, the average number of headcount of the Group was 149 management personnel, 14,047 employees and 1,557 workers. For the year 2012, the average number of headcount of the Group was 151 management personnel, 14,176 employees and 1,625 workers. Note 2. Significant accounting policies Basis of preparation The accompanying consolidated financial statements as of 31 December 2013 and for the year then ended have been prepared in accordance with International Financial Reporting Standards ( IFRS ) as adopted for use in the European Union. The Group did not early adopt any IASB standards or interpretations. The consolidated financial statements have been prepared on a historical cost basis, except for the measurement at fair value of derivatives and available-for-sale financial assets. The carrying values of assets and liabilities that are hedged with fair value hedges are adjusted to record the change in the fair value attributable to the risks that are being hedged. Changes in accounting policies The Group doesn t anticipate the application of standards and interpretations. The accounting policies applied are consistent with those of the previous financial years except that the Group applied the new or revised IFRS standards and interpretations as adopted by the European Union that became mandatory on 1 January 2013 and that are detailed as follows: Improvements to IFRS s ( ); Amendments to standards: o o o Amendments to IAS 1 - Presentation of Items of Other Comprehensive Income (Clarification of the requirement for comparative information); Amendments to IFRS 7 - Financial Instruments: Disclosures (Offsetting Financial Assets and Financial Liabilities); Amendments to IAS 12 - Income Taxes (Deferred Tax: Recovery of Underlying Assets). Newly issued standards: o IFRS 13 ( Fair Value Measurement ). 37

207 Revised standards: o IAS 19 ( Employee Benefits ): The revision mainly relates on post-employment benefits (see notes 9.2 and 9.3). The major changes relate to the recognition of actuarial gains and losses through Other Comprehensive Income (equity) and the alignment of the expected return of assets to the discount rate. When applying the revision, Belgacom decided to classify the net periodic pension cost in operating and financing activities for their respective components. The adoption of IAS 19 Revised in 2013 requires a retrospective application, meaning that the year 2012 (including the opening balance sheet of 2012) is restated. The adoption of these new standards and interpretations has limited impacts on the financial statements of the Group, except for the adoption of IAS 19 Revised on Employee Benefits with impacts as detailed here below: (EUR mi lli o n ) As o f 1 Ja n u a ry 2012 a s p revi o u s ly IAS 19 a djus tments As a t 1 Ja n u a ry 2012 res ta ted Pensions and similar obligations Pension asset Deferred income taxes (net) Effect o n eq u i ty - d ecrea s e -75 Shareholders'equity 3, ,003 Non Controlling Interests (EUR mi lli o n ) As a t 31 D ecemb er 2012 a s p revi o u s ly repo rted IAS 19 a djus tments As a t 31 D ecemb er 2012 (a s res ta ted ) Pensions and similar obligations Pension asset Deferred income taxes (net) Effect o n eq u i ty - d ecrea s e -135 Shareholders'equity 3, ,881 Non Controlling Interests The accumulated impact on assets, liabilities and equity as per 31 December 2013 from the application of amendment to IAS 19 as revised 2011 is summarized below: (EUR mi lli o n) IAS 19 a d jus ted Increase in pensions and similar obligations 152 Deferred income taxes liablitites -29 Effect o n eq ui ty - d ecrea s e -123 Shareholders'equity -123 Non controlling interests 0 (EUR millio n ) 2012 res ta ted 2013 Imp a ct o n o ther co mp rehen s i ve i n co me fo r the yea r o f the a p p li ca ti o n o f IAS 19 (a s revi s ed 2011) Increasse/ (decrease) in remeasurement of defined benefit obligation and actuarial gains(losses) recognized Increase / (decrease) deferred income taxes (In crea s e) / d ecrea s e eq u i ty Shareholders'equity Non Controlling Interests 0 0 Imp a ct o n i n co me s ta temen t Operating income before depreciation, amortization and non recurring Non recurring expense 3 0 Net finance cost Imp a ct o n p ro fi t b efo re ta x o f the yea r 1 5 (Increase)/ decrease in deferred income taxes 0-1 Imp a ct o n n et i n co me o f the yea r 1 4 Group share 1 4 Non Controlling Interests 0 0 Basis of consolidation Note 6 lists the Group s subsidiaries, joint ventures and associates. Subsidiaries are those entities controlled by the Group. Control exists when Belgacom has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The investments in subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group. Intercompany balances and transactions, and resulting unrealized profits or losses between Group companies are eliminated in consolidation. When necessary, accounting policies of subsidiaries are adjusted to ensure that the consolidated financial statements are prepared using uniform accounting policies. Companies that are jointly controlled (defined as those entities in which the Group has joint control through a contractual arrangement requiring unanimous consent of the parties sharing control) are included using the equity method, from the date on which joint control is established and until the date on which the Group ceases to have joint control over the joint venture. 38

208 Associated companies in which the Group has a significant influence, defined as an investee in which Belgacom has the power to participate in its financial and operating policy decisions (but not to control the investee), are also accounted for using the equity method. Under that method, the investments held in associates are initially recorded at cost and the carrying amount is subsequently adjusted to recognize the Group s share in the profit or losses of the associate as from the date of acquisition. These investments and the equity share of results for the period are shown in the balance sheet and income statement as investments in associates and joint ventures and share in the result of the associates and joint ventures, respectively. Subsidiaries and joint ventures acquired and held exclusively with a view of disposal within twelve months are consolidated and presented in the balance sheet as assets and liabilities held for sale. Business Combinations Acquisitions of businesses are accounted using the acquisition method. The consideration transferred is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued in exchange for control of the acquiree. Acquisition related costs are recognised in profit or loss as incurred. At acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at that date including the fair valuation of unrecognised assets and liabilities in the balance sheet of the acquiree including mainly customer base and trade name. Non-controlling interests may be initially measured either at fair value or at the proportionate share of the recognised amounts of the acquiree s identifiable net assets. The choice of the measurement principle is made on a transaction by transaction basis. Judgments and estimates In preparing the consolidated financial statements, management is required to make judgments and estimates that affect amounts included in the financial statements. Judgments and estimates that are made at each reporting date reflect conditions that existed at those dates (e.g. market prices, interest rates and foreign exchange rates). Although these estimates are based on management s best knowledge of current events and actions that the Group may undertake, actual results may differ from those estimates. Major judgments and estimates are principally made in the following areas: Claims and contingent liabilities Related to claims and contingencies, judgment is necessary in assessing the existence of an obligation resulting from a past event, in assessing the probability of an economic outflow, and in quantifying the probable outflow of economic resources. This judgment is reviewed when new information becomes available and with support of outside experts advises. Recoverable amount of cash generating units including goodwill In the context of the impairment test, the key assumptions that are used for estimating the recoverable amounts of cash generating units including goodwill are discussed in note 3 (Goodwill). Actuarial assumptions related to the measurement of employee benefit obligations and plan assets The Group holds several employee benefit plans such as pension plans, other post-employment plans and termination plans. In the context of the determination of the obligation, the plan asset and the net periodic cost, the key assumptions that are used are discussed in note 9 (Assets and liabilities for pensions, other post-employment benefits and termination benefits). Acquisition of control in BICS as of 1 January 2010 The shareholders agreement of BICS foresees decision-making rules and a deadlock procedure in force as from 1 January 2010 leading the Group to conclude that it controls BICS as from that date. As a result of this and in application of the revised IFRS 3, BICS is fully consolidated as from 1 January

209 Foreign currency translation Foreign currency transactions The presentation currency for the Group is the Euro. Foreign currency transactions are translated, on initial recognition, at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency of the entity at the balance sheet date using the exchange rate at that date. Net exchange differences on the translation of monetary assets and liabilities are classified in other operating expenses in the income statement in the period in which they arise. Foreign operations Some foreign subsidiaries and joint-ventures operating in non-euro countries are considered as foreign operations that are integral to the operations of the reporting enterprise. Therefore, monetary assets and liabilities are translated using the exchange rate at balance sheet date, non-monetary assets and liabilities are translated at the historical exchange rate, except for non-monetary items that are measured at fair value in the domestic currency and that are translated at the exchange rate when the fair value was determined. Revenue and expenses of these entities are translated at the weighted average exchange rate. The resulting exchange differences are classified in other operating expenses in the income statement. For other foreign subsidiaries and joint-ventures operating in non-euro countries, assets and liabilities are translated using the exchange rate at balance sheet date. Revenue and expenses of these entities are translated at the weighted average exchange rate. The resulting exchange differences are taken directly to a separate component of equity. On disposal of such entity, the deferred cumulative amount recognized in equity relating to that particular foreign operation is recognized in the income statement. All exchange differences arising from a monetary item that forms part of the Group s net investment in such entity are recognized in the same separate component of equity. Goodwill Goodwill represents the excess of the sum of the consideration transferred, the amount of non-controlling interests, if any, and the fair value of the previously held interest, if any, over the net fair value of identifiable assets, liabilities and contingent liabilities acquired in business combination. When the Group obtains control, the previously held interest in the acquiree, if any, is re-measured to fair value through the income statement. When the net fair value, after reassessment, of identifiable assets, liabilities and contingent liabilities acquired in a business combination exceeds the sum of the consideration transferred, the amount of non-controlling interests, if any, and the fair value of the previously held interest, if any, this excess is immediately recognized in income statement as a bargain purchase gain. Changes in a contingent consideration included in the consideration transferred are adjusted against goodwill when they arise during the provisional purchase price allocation period and when they relate to facts and circumstances existing at acquisition date. In other cases, depending if the contingent consideration is classified as equity or not, changes are taken into equity or in the income statement. Acquisition costs are expensed and non-controlling interests are measured at acquisition date either at their value or at their proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis. Goodwill is stated at cost and not amortized but subject to an annual impairment test at the level of the cash generating unit to which it relates and whenever there is an indicator that the cash generating unit to which the goodwill has been allocated, may be impaired. An impairment loss recognized for goodwill is never reversed in subsequent periods, even if there are indications that the impairment loss may no longer exist or may have decreased. 40

210 Intangible assets with finite useful life Intangible assets consist primarily of the Global System for Mobile communication ( GSM ) license, the Universal Mobile Telecommunication System ( UMTS ) license, 4G licenses, customer bases and trade names acquired in business combinations, internally developed software and other intangible assets such as football rights and broadcasting rights and externally developed software. The Group capitalizes certain costs incurred in connection with developing or purchasing software for internal use when they are identifiable, when the group controls the asset and when future economic benefits from the asset are probable. Capitalized software costs are included in internally generated and other intangible assets and are amortized over three to five years. Intangible assets with finite life acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Intangible assets with finite useful life are stated at cost less accumulated amortization and impairment losses. The residual value of such intangible assets is assumed to be zero. Customer bases and trade names acquired in business combinations are straight-line amortized over their estimated useful life (3 to 20 years). Except when the use of an asset is limited in time, for contractual reasons or reflecting the management intention on the use of the asset, the duration of an asset s useful life is set at acquisition date, for each asset individually, in such a way that the expected cumulated discounted cash flows generated by the concerned asset over its useful life represent approximately 90% of the total cumulated discounted cash flows expected from the asset. GSM, UMTS and 4 G licenses, other intangible assets and internally generated assets with finite useful life are amortized on a straight-line basis over their estimated useful life. Amortization commences when the intangible asset is ready for its intended use. The licenses useful lives are fixed by Royal Decree and they range from 5 to 20 years. The useful lives are assigned as follows: GSM, UMTS, 4G and other network licenses GSM (2G) renewed license (2010) UMTS (3G) LTE (4G) 800 Mhz (4G) Useful life (years) Over the license period Customer bases and trade names acquired 3 to 20 Software Rights to use, football and broadcasting rights Over the contract period 5 (usually from 2 to 5) The 800 Mhz spectrum license (acquired end 2013) is paid by installments over a 20-year period. As a financing is provided by the seller over the lifetime of the license and the period between acquisition and financing is significant, both have been treated as a non-cash transaction in the cash flow statement. Yearly payments to the seller to reduce the outstanding liability are included in the financing activities of the cash flow statement. The amortization period and the amortization method for an intangible asset with finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates. Property, plant and equipment Property, plant and equipment including assets rented to third parties are presented according to their nature and are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of additions and substantial improvements to property, plant and equipment is capitalized. The cost of maintenance and repairs of property, plant and equipment is charged to operating expenses when it does not extend the life of the asset or does not significantly increase its capacity to generate revenue. The cost of an item of property, plant and equipment includes the costs of its dismantlement, removal or restoration, the obligation for which the Group incurs as a consequence of installing the item. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognized. 41

211 Depreciation of an asset begins when the asset is ready for its intended use. Depreciation is calculated using the straightline method over the estimated useful life of the asset. The useful lives are assigned as follows: Land and buildings Useful life (years) Land Indefinite Buildings and building equipment 22 to 33 Facilities in buildings 3 to 10 Leasehold improvement and advertising equipment 3 to 10 Technical and network equipment Cables and ducts 15 to 20 Switches 8 to 10 Transmission 6 to 8 Radio Access Network 6 to 7 Mobile sites and site facility equipment 5 to 10 Equipment installed at client premises 2 to 8 Data and other network equipment 2 to 15 Furniture and vehicles Furniture and office equipment 3 to 10 Vehicles 5 to 10 The asset s residual values, useful life and depreciation methods are reviewed, and adjusted if appropriate, at each financial year end. Costs of material, personnel expenses and other operating expenses are shown net of work performed by the enterprise that is capitalized in respect of the construction of property, plant and equipment. Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of a qualifying asset. Impairment of non-financial assets The Group reviews the carrying value of its non-financial assets at each balance sheet date for any indication of impairment. The Group compares at least once a year the carrying value with the estimated recoverable amount of intangible assets under construction and cash generating units including goodwill. The Group performs this annual impairment test during the fourth quarter of each year. An impairment loss is recognized when the carrying value of the asset or cash generating unit exceeds the estimated recoverable amount, being the higher of the asset s or cash generating unit s fair value less costs to sell and its value in use for the Group. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash generating unit. Impairment losses on goodwill, intangible assets and property, plant and equipment are recorded in operating expenses. An assessment is made at each balance sheet date as to determine whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset s recoverable amount since the last impairment loss was recognized. If that is the case, impairment losses in respect of assets other than goodwill are reversed in order to increase the carrying amount of the asset to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the income statement in operating expenses. 42

212 Deferred taxation Deferred taxation is provided for all temporary differences between the carrying amount of assets and liabilities in the consolidated balance sheet and their respective taxation bases. Deferred tax assets associated to deductible temporary differences and unused tax losses carried forward are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary difference or the unused tax losses can be utilized. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset will be realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Changes in deferred tax assets and liabilities are recognized in the income statement except to the extent that they relate to items recognized directly in equity, in which case the tax effect is also recognized directly in equity. Deferred tax liabilities with respect to temporary differences associated with investments in subsidiaries are recognized except when the parent company is able to control the timing of the reversal of the temporary difference and it is not probable that the difference will be reversed in a foreseeable future. Pensions, other post-employment benefits and termination benefits The Group operates several defined benefit pension plans to which the contributions are made through separately managed funds. The Group also agreed to provide additional post-employment benefits to certain employees. The cost of providing benefits under the plans is determined separately for each plan using the projected credit unit actuarial valuation method. Actuarial gains and losses are recognized through Other Comprehensive Income (equity). Any past service cost and gain or loss on settlement is recognized in income statement when they occur. The Group also operates several defined contribution plans. Contributions are expensed as incurred. The Group operates several restructuring programs that involve termination benefits or other forms of additional compensation. The actuarial gains and losses on these liabilities are recognized in the income statement when incurred. When applying the IAS 19 revised, the Group decided to classify the periodic cost in operating and financing activities for their respective components. Short term and long term employee benefits The cost of all short-term and long-term employee benefits, such as salaries, employee entitlements to leave pay, bonuses, medical aid and other contributions, are recognized during the period in which the employee renders the related service. The Group recognizes those costs only when it has a present legal or constructive obligation to make such payment and a reliable estimate of the liability can be made. 43

213 Financial instruments Fair value of financial instruments The following methods and assumptions were used to estimate the fair value of financial instruments: For investments in quoted companies and mutual funds, the fair value is their quoted price; For investments in non-quoted companies, fair value is estimated by reference to recent sale transactions on the shares of these non-quoted companies and, in the absence of such transactions, by using different valuation techniques such as discounted future cash flow models and multiples methods; For investments in non-quoted companies for which no fair value can be reliably determined, fair value is based on the historical acquisition cost, adjusted for impairment losses, if any; For long term debts carrying a floating interest rate, the amortized cost is assumed to approximate fair value; For long term debts carrying a fixed interest rate, the fair value is determined based on the market value when available or otherwise based on the discounted future cash flows; For trade receivables, trade payables, other current assets and current liabilities, the carrying amounts reported in the balance sheet approximate their fair value considering their short maturity; For cash and cash equivalents, the carrying amounts reported in the balance sheet approximate their fair value considering their short maturity; For derivatives, fair values have been estimated by either considering their quote price on an active market, and if not available by using different valuation techniques, in particular the discounting of future cash flows. Criteria for initial recognition and for de-recognition of financial assets and liabilities Financial instruments are initially recognized when the Group becomes party to the contractual terms of the instruments. Normal purchases and sales of financial assets are accounted for at their settlement dates. Financial assets (or a portion thereof) are de-recognized when either the Group realizes the rights to the benefits specified in the contract, either the rights expire or, either the Group surrenders or otherwise loses control of the contractual rights that comprise the financial asset. Financial liabilities (or a portion thereof) are de-recognized when the obligation specified in the contract is discharged, cancelled or expires. Criteria for offsetting financial assets and liabilities Where a legally enforceable right of offset exists for recognized financial assets and liabilities, and there is an intention to settle the liability and realize the asset simultaneously, or to settle on a net basis, all related financial effects are offset. Criteria for classifying financial instruments as held to maturity Some financial instruments are classified as held to maturity based on the ability and the intention of the Group to keep these instruments until maturity. The Group has already a large experience of respecting that statement. This is reinforced by the fact that the financial instruments classified as held to maturity are medium to short term. Criteria for classifying financial instruments as available-for-sale Non-derivative financial assets that the Group has no intention nor ability to keep until maturity, that the Group does not classify as loans and receivables and that the Group does not designate as at fair value through profit and loss at inception, are classified as available-for-sale. Shares in equity of non-consolidated entities are usually classified as available-for-sale financial assets. Shares in mutual funds or similar funds are classified as available-for-sale, if not designated at fair value through profit and loss at inception. Other participating interests Other participating interests are equity instruments in entities that are not subsidiaries, joint ventures or associates. They are initially recognized at cost, being the fair value of the consideration given and including acquisition costs associated with the investment. These interests are classified as available-for-sale financial assets in the balance sheet. After initial recognition, The participating interests in non-quoted companies for which no fair value can be reliably determined are carried at cost with adjustment for impairment loss if any; All other participating interests are carried at fair value, with recognition of the changes in fair value directly in equity, until the financial asset is sold, collected or otherwise disposed of, at which time the cumulative gain or loss previously reported in equity is included in income statement in net finance cost. 44

214 Other non-current financial assets Other non-current financial assets include derivatives (see below), long-term interest-bearing receivables such as loans to joint-ventures, personnel and cash guarantees and long-term investments such as notes and purchased bonds. Long-term receivables are accounted for as loans and receivables originated by the Group and are carried at amortized cost. Longterm investments are classified as held-to-maturity and are carried at amortized cost. Trade receivables and other current assets Trade receivables and other current assets are shown on the balance sheet at nominal value (generally, the original invoice amount) less the allowance for doubtful debts. Investments Investments include shares in funds and mutual funds, fixed income securities and deposits with a maturity greater than three months but less than one year. Shares are initially recognized at cost, being the fair value of the consideration given and including acquisition costs associated with the investment. After initial recognition, shares are treated as available-for-sale, with re-measurement to fair value recorded directly in equity until the investment is sold, collected or otherwise disposed of, at which time the cumulative gain or loss previously reported in equity is included in income statement. Fixed income securities are initially recognized at cost, being the fair value of the consideration given and including acquisition costs associated with the investment. After initial recognition, fixed income securities that are classified as available-for-sale, are measured at fair value, with gains and losses on re-measurement recognized in equity until the investment is sold, collected or otherwise disposed of, at which time the cumulative gain or loss reported in equity is included in income statement. Fixed income securities that are intended to be held-to-maturity are measured at amortized cost, using the effective interest rate method. Deposits are measured at amortized cost. Cash and cash equivalents Cash and cash equivalents include cash, current bank accounts and investments with an original maturity of less than three months, and that are highly liquid. Cash and cash equivalents are carried at amortized cost. Impairment of financial assets The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is impaired. When the carrying amount of the financial asset is greater than its recoverable amount, an impairment loss is recorded. An allowance account is always used to account for impairment losses, whether impairment is caused by credit losses or not. Allowances and impairment on financial assets are accounted for as other operating expenses when the assets relates to operating activities. For other participating interests, associates and assets relating to finance activities, allowances and impairment losses are accounted for as finance costs. Impairment losses on receivables are determined when it is probable that the Group will not be able to collect any amount due, on basis of individualized criteria or based on portfolio statistics and analysis of ageing balances. In case of impairment due to credit losses, the impairment allowance is reversed when it becomes probable that the Group will collect the financial asset, as a result of various indicators such as the receipt of collaterals, a successful capital increase at the customer etc. The impairment allowance will also be reversed when the asset is definitively sold, collected or at the opposite, uncollectible, at what time, the definitive gain (loss) on disposal of the asset is recorded in income statement. Impairment losses on available for sale equity investments are recognized in net income in case of significant (more than 30%) or prolonged (more than 12 months successively) decline in the fair value below cost. These impairment losses are not reversed in income statement. If it appears that an existing impairment loss has to be reversed, reversal will be recorded in equity, as a re-measurement to fair value. 45

215 Interest-bearing liabilities All loans and borrowings are initially recognized at cost, being the fair value of the consideration received, net of issuance costs associated with the borrowings. After initial recognition, debts are measured at amortized cost using the effective interest rate method, with amortization of discounts or premiums through the income statement. Derivatives The Group makes use of derivatives such as IRS, IRCS, forward foreign exchange contracts and currency options to reduce its risks associated with interest rate and foreign currency fluctuations on underlying assets, liabilities and anticipated transactions. The derivatives are carried at fair value under the captions other assets (non-current and current), interestbearing liabilities (non-current and current) and other payables (non-current and current). The Group uses IRS and IRCS to reduce its exposure to interest rate and foreign currency fluctuations on long-term debts. These economical hedges are not accounted for as hedges. The Group does not hold or issue derivative financial instruments for trading purposes but some of its derivative contracts do not meet the criteria set by IAS 39 to be considered as hedges and are therefore treated as derivatives held-fortrading, with changes in fair value recorded in the income statement. The Group uses currency options and forward foreign exchange contracts to manage its foreign currency exposure arising from operational contracts. When the matching between these instruments and the underlying exposure is sufficiently effective, and the effectiveness can be easily demonstrated, cash flow hedging is applied. i.e. the effective portion of the gains and losses on the hedging instrument is recognized via other comprehensive income until the hedged item occurs; the ineffective portion is recognized in profit or loss. The other forward exchange contracts are not accounted for as hedges and are consequently carried at fair value, with changes in fair value recognized in the income statement. Some debts issued by the Group include embedded derivatives. Such derivatives are separated from their host contract and carried at fair value with changes in fair value recognized in the income statement. The mark-to-market effects on these embedded derivatives are neutralized by those on other derivatives. As from September 2011, the Group started contracting derivatives to hedge its exposure to part of commodity price fluctuations for highly probable forecasted transactions. The Group applies cash flow hedge accounting; the effective portion of the gains and losses on the hedging instrument is recognized via other comprehensive income until the hedged item occurs. If the hedged transaction leads to the recognition of an asset, the carrying amount of the asset at the time of initial recognition is adjusted to include the amount previously recognized via other comprehensive income. The ineffective portion of a cash flow hedge is always recognized in profit or loss. Net gains and losses on financial instruments The Group excludes dividends, interest income and interest charges from the net gains and losses on financial instruments. Dividends, interest income and interest charges arising from financial instruments are posted to the finance income/(costs). Net gains/(losses) from disposals or settlements of financial instruments are accounted for as finance income/(costs) when the instruments relate to financing activities. When the financial instruments relate to operating or investing activities, net gains/(losses) from disposals or settlements are accounted for as other operating income/(expenses). Net gains and losses resulting from fair value measurement of derivatives used to manage foreign currency exposure on operating activities that do not qualify for hedge accounting under IAS 39 are recorded as operating expenses. Net gains and losses resulting from fair value measurement of derivatives used to manage interest rate exposure on interest-bearing liabilities that do not qualify for hedge accounting under IAS 39 are recorded in finance income/(costs). 46

216 Inventories Inventories are stated at the lower of cost and net realizable value. Cost is determined based on the weighted average cost method except for IT equipments (FIFO method) and goods purchased for resale as part of specific construction contracts (individual purchase price). For construction contracts, the percentage of completion method is applied. The stage of completion is measured by reference to the amount of contract costs incurred for work performed at balance sheet date in proportion to the estimated total costs for the contract. Contract cost includes all expenditures directly related to the specific contract and an allocation of fixed and variable overheads incurred in connection with contract activities based on normal operating capacity. Leases Leases of assets through which all the risks and the benefits of ownership of the asset are substantially transferred to the Group are classified as finance lease. Finance leases are recognized as assets and liabilities (interest-bearing liabilities) at amounts equal to the lower of the fair value of the leased asset and the present value of the minimum lease payments at inception of the lease. Amortization and impairment testing for depreciable leased assets, is the same as for depreciable assets that are owned. Lease payments are apportioned between the outstanding liability and finance charges so as to achieve a constant periodic rate of interest on the remaining balance of the liability. Leases of assets through which all the risks and the benefits of ownership of the asset are substantially retained by the leasing company are classified as operating lease. Payments under operating leases are recognized as an expense in the income statement on a straight-line basis over the lease term. Provisions Provisions are recognized when the Group has a present legal or constructive obligation resulting from past events, for which it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. A past event is deemed to give rise to a present obligation if, taking into account the available evidence, it is more likely than not that a present obligation exists at the balance sheet date. The amount recognized as provision is the best estimate of the expenditure required to settle the present obligation at the end of the reporting period. Provisions are discounted where the effect of the time value of money is material. The unwinding is recognized via the finance expense. Certain assets and improvements that are situated on property owned by third parties must eventually be dismantled, and the property must be restored to its original condition. The estimated costs associated with dismantling and restorations are recorded under property, plant and equipment and depreciated over the useful life of the asset. The total estimated cost required for dismantling and restoration, discounted to its present value, is recorded under provisions. Where discounting is used, the increase in the provision due to the passage in time is recognized in financial expense in the income statement. Assets and associated liabilities classified as held for sale The Group classifies assets (or disposal group) as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through a continuing use. This condition is met when the asset (or disposal group) is available for immediate sale in its present condition, the sale is highly probable and expected to occur within one year. Assets and associated liabilities held for sale (or disposal group) are recorded at the lower of their carrying value or fair value less costs to sell, and are classified as current assets. Share based payment Equity and cash settled share-based payments to employees are measured at the fair value of the instrument at the grant date taking into account the terms and conditions upon which the rights are granted, and by using a valuation technique that is consistent with generally accepted valuation methodologies for pricing financial instruments, and that incorporates all factors and assumptions that knowledgeable, willing market participants would consider in setting the price. For equity settled arrangement the fair value is recognized in personnel expenses over their vesting period, together with an increase of the caption stock compensation of the shareholders equity for the equity part and an increase of a dividend liability for the dividend part. When the share options give right to dividends declared after granting the options, the fair value of this right is re-measured regularly. For cash settled arrangement the fair value is recognized in personnel expenses over their vesting period together with an increase in the liabilities. The liabilities are regularly re-measured to reflect the evolution of the fair values. 47

217 Revenue and operating expenses Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Specific revenue streams and related recognition criteria are as follows: Revenue from wireline, carrier and mobile traffic is recognized on usage; Revenue from connection fees and installation fees is recognized in income at the time of connection or installation; Revenue from sales of communication equipment is recognized upon delivery to the third party distributors or upon delivery by the own Belgacom shops to the end-customer; Revenues relating to the monthly rent or access fees, which are applicable to wireline and mobile revenues are recognized in the period in which the services are provided; Subscription fees are recognized as revenue over the subscription period on a pro-rata basis; Prepaid revenue such as revenue from pre-paid fixed and mobile phone cards is deferred and recognized based on usage of the cards; Maintenance fees are recognized as revenue over the maintenance period on a pro-rata basis; Commissions received are recognized net when the Group acts as an agent, i.e. when the Group does not bear inventory risk and credit risk, does not set the prices nor change or perform part of the services and has no latitude in the supplier s selection; The revenue from sales arrangements with multiple deliverables are allocated to the different components of the arrangements based on their relative fair values being the amount for which each component could be sold separately. However when an amount allocated to a delivered component is contingent upon the delivery of additional components or meeting specified performance conditions, the amount allocated to that delivered component is limited to the non-contingent amount. Net revenue is defined as the gross inflow of economic benefits during the period arising in the course of the ordinary activities and taking into account the amount of any trade discounts and volume rebates allowed by the Group. The award credits (loyalty programs) are recorded as a separate component of the sales transaction and recorded as deduction from the initial sale in net revenue. Revenue from award credits is recognized at redemption. Expenditure on research activities is recognized in the income statement as an expense as incurred. The Group s consolidated income statement presents operating expenses by nature. Operating expenses are reported net of work performed by the enterprise that is capitalized. The costs of materials and services related to revenues include the costs for purchases of materials and services directly related to revenue. Costs for advertising and other marketing charges are expensed as incurred. As a consequence of the new Belgian Telecom law in force as from 1 October 2012 all dealer commissions are expensed as incurred. The accumulated deferred upfront dealer commissions were expensed as cost of materials and services related to revenue. Non-recurring income and non-recurring expenses include gains or losses on the disposal of consolidated companies exceeding individually EUR 5 million, fines and penalties imposed by competition authorities or by the regulator exceeding EUR 5 million, costs of employee restructuring programs and the effect of settlements of post-employment benefit plans. 48

218 Note 3. Goodwill (EUR mi lli o n ) Go o d wi ll As o f 1 Ja n u a ry ,323 Acquisition of Wireless Technologies BVBA 15 As o f 31 D ecemb er ,339 Classified as held for sale -1 Impairment -18 As o f 31 D ecemb er ,320 In 2012 the acquisition of Wireless Technologies BVBA resulted in an increase of goodwill of EUR 15 million (see note 6.4). In 2013 goodwill of two disposal groups was reclassified as held for sale with an impairment loss recognized for an amount of EUR 18 million (see note 16). Goodwill is tested for impairment at the level of operating segments as these are the Group cash-generating units; the performance, financial position (including goodwill) and capital expenditures within the Group are being monitored at operating segment level. For the purpose of impairment testing, goodwill acquired in a business combination is, at acquisition date, allocated to each of the Group operating segments that is expected to benefit from the business combination. Therefore this allocation is based on the nature of the acquired customers and activities. At 31 December 2013, all businesses acquired were fully allocated to one single operating segment, with the exception of the goodwill resulting from the acquisition of noncontrolling interests in 2007 in Belgacom Mobile, which was allocated to the Consumer Business Unit and the Enterprise Business Unit on basis of their relative value in use for the Group at 31 December The carrying amount of goodwill is allocated to the operating segments as follows: As o f 31 D ecemb er (EUR mi lli o n) Consumer Business Unit 1, Enterprise Business Unit 1,073 1,073 International Carrier Services To ta l 2,339 2,320 The recoverable amount at segment level (including goodwill) was based on the value in use estimated through a discounted free cash flow model. The key variables used in determining the value in use are the operating income before depreciation and amortization (except for the International Carrier Services segment for which the direct margin is more important); the capital expenditures; the long term growth rate; the post-tax weighted average cost of capital; the mark-up rate to be applied on staff and support services, should Belgacom Group organize a full and at arm s length transfer pricing between the segments; the expected rate of return on SDE capital employed, allowing the determination of SDE network related costs to be invoiced to the other segments, should Belgacom Group organize a full and at arm s length transfer pricing between the segments. CBU and EBU operating income before depreciation and amortization is highly sensitive to the following operational parameters: number of customers by type of service (TV, fix.), traffic (if applicable) and net ARPU by customer for each type of service. The value attached to each of these operational parameters is the result of an internal process, conducted in each segment and at group level, by confronting data from the market, market perspectives, and the strategies Belgacom intends to implement in order to be adequately prepared for upcoming challenges. For the years 2014 to 2018, the operating segments free cash flows were based on the Five Year Plan as presented by management to the Board of Directorsubsequent years were extrapolated based on a growth rate varying between 0.0% and 1.0% per year (CBU: 0.5%, EBU: 1.0% and ICS: 0.5%), reflecting management vision about the long term evolution of the market and based on historical data. The free cash flows considered for calculating the value in use are estimated for the concerned assets in their current condition and exclude the cash inflows and outflows that are expected to arise from any future restructuring to which the Group is not yet committed and from improving or enhancing the assets performance. Free cash flows of each segment were discounted with the Group post-tax weighted average cost of capital of 6.4%, with the exception of the ICS segment for which a specific post-tax weighted average cost of capital of 9.0% was used, its activities being deemed different enough from those of the rest of the Group to justify a specific calculation. The pre-tax weighted average cost of capital, derived from the post-tax weighted average cost of capital via an iterative method, was comprised between 8.40% and 11.1%. 49

219 The calculated weighted average costs of capital at Group level and for the ICS segment are based on the relative weight of their capital structure components and include a risk premium specific to their inherent risks. None of the goodwill was impaired at 31 December Sensitivity analysis for all segments demonstrates that in case of a reasonable change in one of the key assumptions, their values in use still exceed their net carrying values. Note 4. Intangible assets with finite useful life (EUR mi lli o n ) GSM a n d UMTS li cen s es In tern a lly g en era ted a s s ets Cu s to mer b a s es a n d tra d e n a mes a cq u i red TV ri g hts Other i n ta n - g i b le a s s ets To ta l Co s t As o f 1 Ja n u a ry ,773 Additions Acquisition of subsidiary Disposals Reclassifications As o f 31 D ecemb er ,9 41 Additions Disposals Classified as held for sale As o f 31 D ecemb er ,241 Accu mu la ted a mo rti za ti o n a n d i mp a i rmen t As o f 1 Ja n u a ry ,5 9 6 Amortization charge for the year Disposals Reclassifications As o f 31 D ecemb er ,844 Amortization charge for the year Impairment charge Disposals Classified as held for sale Reclassifications As o f 31 D ecemb er ,05 6 Ca rryi n g a mo u n t a s o f 31 D ecemb er ,09 7 Ca rryi n g a mo u n t a s o f 31 D ecemb er ,185 The GSM and UMTS licenses acquisition value include the costs related to the Global System for Mobile communication ( GSM ) and Universal Mobile Telecommunication System ( UMTS ). In 1994, the Group acquired a GSM license (covering the use of 900 MHz spectrum) in Belgium for an amount of EUR 226 million. Amortization started in 1995 over the initial life of the license (15 years). Since 6 April 2008, the GSM license has been prolonged until 8 April 2015 free of charge. On 15 March 2010, the Belgian State adopted a Law imposing an additional fee for the extension of the 2G licenses until 2015 for EUR 74 million (for 12 MHz duplex), amortized over 5 years. Belgacom has chosen to pay by instalments. On 18 August 2010, Belgacom lodged an annulment procedure before the Constitutional Court against the 15 March 2010 law which the Court rejected on 17 October In March 2001, the Group acquired an UMTS license in Belgium for an amount of EUR 150 million. Amortization started in June 2004 over the initial life of the license that is scheduled to end in In 2011 Belgacom acquired a 4G license in the 2,6 GHz frequency band for an amount of EUR 20 million which was paid in The license is valid for 15 years effective as of 1 July 2012, amortization started as from July In December 2013, the Group acquired a licence for the 800 Mhz frequency band for the amount of EUR 120 million which Belgacom decided to pay by installments. The related outstanding amount that will be settled after more than twelve months is included in other non current payables (note 20). Amortization started in December Customer bases and trade names acquired include intangible assets recognized as part of business combinations; mainly as result of the purchase price allocation performed when the Group acquired control over BICS. TV rights include football rights and broadcasting rights acquired. Some of these rights are acquired with a deferred payment plan. The related liability is classified as trade payable and include EUR 29 million to be settled in more than twelve months. Internally generated assets mainly relate to development expenditures for internally developed software (mainly billing and ordering related). The aggregate amount of research expensed for these internally generated software during 2013 amounts to EUR 23 million. Other intangible assets mainly include purchased software (mainly network related) and rights of use for cables. 50

220 Note 5. Property, plant and equipment (EUR mi lli o n ) Co s t La n d a n d b u i ld i n g s Techni - ca l a n d n etwo rk eq u i p - men t Other ta n g i b le a s s ets As s ets u n d er co n s tru c- ti o n As o f 1 Ja n u a ry , ,6 80 Additions Acquisition of subsidiary Disposals Reclassifications As o f 31 D ecemb er , ,9 12 Additions Disposals Classified as held for sale Reclassifications As o f 31 D ecemb er , ,273 To ta l Accu mu la ted d ep reci a ti o n a n d i mp a i rmen t As o f 1 Ja nua ry , ,279 Depreciation charge for the year Acquisition of subsidiary Disposals Reclassifications As o f 31 D ecemb er , ,445 Depreciation charge for the year Impairment charge Disposals Subsidiaries reclassified as held for sale Reclassifications As o f 31 D ecemb er , ,715 Ca rryi n g a mo u n t a s o f 31 D ecemb er , ,46 7 Ca rryi n g a mo u n t a s o f 31 D ecemb er , ,5 5 8 As a consequence of the gradual evolution to the current renting model for internet modems, Belgacom modems rented to customers are capitalized as from 1 January This resulted in a positive impact on Cost of Sales, while increasing the level of Capex (EUR 28 million). In 2013, the useful life of modems and decoders was increased with one year from 24 to 36 months. 51

221 Note 6. Investments in subsidiaries, joint ventures and associates Note 6.1. Investments in subsidiaries The consolidated financial statements include the financial statements of Belgacom SA and the subsidiaries listed in the following table: Name Registered office Co u n try o f i n co rp o ra ti o n Gro u p 's p a rti ci p a ti n g i n teres ts Belgacom SA under Public Law Bld du Roi Albert II 27 Belgium Mother company 1030 Bruxelles VAT BE Belgacom Finance SA Rue de Merl 74 Luxemburg 100% 100% 2146 Luxembourg Belgacom Group International Services SA Bld du Roi Albert II 27 Belgium 100% 100% 1030 Bruxelles VAT BE BGC Re Rue de Merl 74 Luxemburg 100% 100% 2146 Luxembourg Connectimmo SA Bld du Roi Albert II 27 Belgium 100% 100% 1030 Bruxelles VAT BE Belgacom Skynet SA Bld du Roi Albert II 27 Belgium 100% 100% 1030 Bruxelles VAT BE Skynet imotion Activities SA Rue Carli 2 Belgium 100% 100% 1140 Evere VAT BE Tango SA Rue de Luxembourg 177 Luxemburg 100% 100% 8077 Bertrange Telindus - ISIT BV Krommewetering 7 The Netherlands 100% 100% 3543 AP UTRECHT Telindus SA Route d Arlon Luxemburg (1) 65% 65% 8009 Strassen Telectronics SA 2 Rue des Mines Luxemburg (1) 65% 65% 4244 Esch sur Alzette Beim Weissenkreuz SA Route d Arlon Luxemburg (1) 64% 64% 8009 Strassen Telindus LTD Centurion - Riverside Way - Watchmoor Park United Kingdom (1) 100% 100% Camberley - Surrey -GU15 3 YL Telindus France SA ZA de Courtaboeuf- 12, Avenue de l'oceanie France (1) 100% 100% Les Ulis Groupe Telindus France SA ZA de Courtaboeuf- 12, Avenue de l'oceanie France (1) 100% 100% Les Ulis Telindus Morocco SAS Bâtiment shore 1, 6ème étage, Casablanca Nearshore Park, 1100 Bd. Al Qods, Sidi Maârouf Morocco (1) (3) 100% 100% Casablanca Belgacom Bridging ICT NV Koning Albert II laan 27 Belgium 100% 100% 1030 Brussels VAT BE Belgacom ICT - Expert Community CVBA Ambachtenlaan 34 Belgium 88% 84% 3001 Heverlee VAT BE Belgacom Opal SA Bld du Roi Albert II 27 Belgium 100% 100% 1030 Bruxelles VAT BE Beldiscom SA Bld d'avroy 240 Belgium (10) 100% Liege VAT BE Mobile-For SA Bld du Roi Albert II 27 Belgium 100% 100% 1030 Bruxelles VAT BE Scarlet NV Ketelmeerstraat 182 The Netherlands (2)(8) 100% 100% 8226JX Lelystad Scarlet Business NV Carlistraat 2 Belgium (2) 100% 100% 1140 Evere VAT BE Scarlet Luxembourg SARL Rue de Bonnevoie 5 Luxemburg (2) 100% 100% 1260 Luxembourg Scarlet Belgium NV Carlistraat 2 Belgium (2) 100% 100% 1140 Evere VAT BE MBS TELECOM NV Carlistraat 2 Belgium (2) (3) 100% 100% 1140 Evere BE Sahara Net LLC Al-Dabal Commercial Tower (ACT) 2nd Floor, Prince (9) 70% 70% Mohammad Quarter, Prince Mohammad Street (First Street) Saudi-Arabia P.O. Box 5480 Zip Code Damman Wireless Technologies NV Stationstraat 34 Belgium (5) 100% 100% 1702 Groot Bijgaarden VAT BE Belgacom International Carrier Services Mauritius Ltd Chancery House 5th floor, Lislet, Geoffroy Street Mauritius (4), (6) 58% 58% Port Louis Belgacom International Carrier Services SA Rue Lebeau 4 Belgium (4) 58% 58% 1000 Brussels VAT BE Belgacom International Carrier Services Deutschland GMBH Mendelssohnstrasse 87 Germany (4) 58% 58% Frankfurt 52

222 Name Registered office Co u n try o f i n co rp o ra ti o n Gro u p 's p a rti ci p a ti n g i n teres ts Belgacom International Carrier Services UK Ltd Great Bridgewater Street 70 United Kingdom (4) 58% 58% M1 5ES Manchester Belgacom International Carrier Services Nederland BV Wilhelminakade 91 The Netherlands (4) 58% 58% 3072 AP Rotterdam Belgacom International Carrier Services North America Inc Corporation trust center Orange street United States (4) 58% 58% USA Willington Delaware Belgacom International Carrier Services Asia Pte Ltd 80, Robinson Road # 02-00, Singapore (4) 58% 58% Singapore Belgacom International Carrier Services (Portugal) SA Avenida da Republica, 50, 10th floor Portugal (4) 58% 58% Lisbon Belgacom International Carrier Services Italia Srl Via della Moscova 3 Italy (4) 58% 58% Milano Belgacom International Carrier Services Spain SL Avenida de Aragon, 330 Spain (4) 58% 58% Edificio 5, Madrid Belgacom International Carrier Services Switzerland AG Papiermülhestrasse 14 Switzerland (4) 58% 58% 3014 Bern Belgacom International Carrier Services Austria GMBH Wildpretmarkt 2-4 Austria (4) 58% 58% 1010 Wien Belgacom International Carrier Services Sweden AB Drottninggatan 30 Sweden (4) 58% 58% Goteborg Belgacom International Carrier Services JAPAN KK #409 Raffine Higashi Ginza, 4-14 Japan (4) 58% 58% Tsukiji 4 - Chome - Chuo-ku Tokyo Belgacom International Carrier Services China Ltd Three Pacific Place - Level 28 China (4) 58% 58% 1, Queen's road East Hong Kong Belgacom International Carrier Services Ghana Ltd Box GP 821 Ghana (4) 58% 58% Accra Belgacom International Carrier Services Dubai FZ-LLC P.O. Box United Arab. Emirates (4) (7) - 58% Dubai Belgacom International Carrier Services South Africa Proprietary Ltd Central Park n Jean Avenue, Centurion South Africa (4)(7) - 58% Gauteng 0157 Belgacom International Carrier Services Kenya Ltd LR-N , 1st Floor Block A Kenya (4)(7) - 58% Nairobi Business Park Ngong Belgacom International Carrier Services France SAS Rue du Colonel Moll 3 France (4) 58% 58% Paris (1) Subsidiaries of the Group Telindus (2) Entity of Group Scarlet (3) Entity indirectly controlled by the Group (4) Entity of BICS Group (5) Entity acquired in 2012 (6) Entity incorporated in 2012 (7) Entity incorporated in 2013 (8) Entity in liquidation (9) Entity held for sale (10) Entity liquidated in 2013 The financial year end of Telindus- ISIT BV is 30 June. For consolidation purpose additional financial statements are prepared as per 31 December. 53

223 Note 6.2. Investments in joint ventures The Group has a joint-venture interest in the following companies: Name Registered office Co u n try o f i n co rp o ra ti o n Gro u p 's p a rti ci p a ti n g i n teres ts Belgacom Mobile Wallet SA/NV Koning Albert II-laan 27 Belgium (1) 50% 1030 Schaarbeek VAT BE Allo Bottin SA 101/109, rue Jean-Jurès France (2) 50% 50% Levalloi-Perret E-Port Communications Systems SA Slijkensesteenweg 2 Belgium 50% 50% 8400 Oostende VAT BE (1) Entity incorporated in 2013 (2) In liquidation In November 2013 Belgacom and BNP Paribas Fortis set up Belgacom Mobile Wallet SA a joint venture to support online and mobile trade in Belgium. It will be commercially launched under the brand Sixdots. Note 6.3. Investments in associates The Group has a significant influence in the following company: Name Registered office Co untry o f i nco rp o ra ti o n Gro up 's p a rti ci p a ti ng i nteres ts ClearMedia NV Zagerijstraat 11 Belgium 40% 40% 2960 Brecht VAT BE Note 6.4. Acquisitions and disposal of subsidiaries, joint ventures and associates Acquisition of 2012 On January 2, 2012 the Group acquired Wireless Technologies BVBA for an amount of EUR 23 million (net of cash acquired). The fair value of the identifiable assets and liabilities of these acquisitions at the date of acquisition and the corresponding carrying amounts immediately prior to the acquisition were: Fa i r va lu e (EUR mi lli o n ) reco g n i s ed o n a cq u i s i ti o n Ca rryi n g va lu e Non current fixed assets 11 6 Inventories 8 8 Trade receivables 10 9 Other current assets 9 9 Investments and cash and cash equivalents 1 1 To ta l a s s ets Deferred income tax liabilities -2 0 Trade payables Other current payables -9-8 To ta l n o n -co n tro lli n g i n teres ts a n d li a b i li ti es Net a s s ets a cq u i red 9 10 Goodwill arising on acquisition 15 Co n s i d era ti o n 24 The co n s i d era ti o n i s d eta i led a s fo llo ws : Cash paid to shareholders 25 Cash to be received from shareholders -1 Co n s i d era ti o n 24 The ca s h o u tflo w o n a cq u i s i ti o n i s a s fo llo ws : Consideration paid 24 Net cash acquired of the subsidiary -1 Net ca s h o u tflo w 23 54

224 Note 7. Other participating interests The net carrying amount of other participating interests evolved on the following way: As o f 31 D ecemb er (EUR millio n ) Net ca rryi n g a mo u n t a s o f 1 Ja n u a ry 31 7 Additions 4 1 Participation interest absorbed or liquidated 0-6 Reversal of impairment loss due to absorbtion or liquidation Reversal of impairment loss 0 5 Impairment loss To ta l 7 6 As o f 31 D ecemb er (EUR millio n ) Cost Accumulated impairment losses Net ca rryi n g a mo u n t 7 6 In 2012, the Group recognized an impairment loss of EUR 27 million mainly on the investment in Onlive. In 2013 an additional impairment loss on other participating interests of EUR 1 million was recognized. At 31 December 2012 and 2013, the other participating interests included almost exclusively shares in equity of nonconsolidated and non-quoted entities for which no fair value can be reliably determined. It is not the Group s intention to divest these participating interests in the short term. The fair values of these participations cannot be reliably estimated as concerning start-up companies to which commonly used valuation techniques cannot be applied. The valuation technique commonly used within Belgacom Group to assess the fair value of a participating interest in an entity is its share in the present value of the entity estimated future free cash flows. However, in the case of start-up entities, the estimated future free cash flows cannot be reliably estimated as their business models are still too volatile. Furthermore, the use of other valuation techniques (such as recent arm s length market transaction, valuation of comparable entities...) is not possible seen the absence of such data. Note 8. Income taxes Gross deferred income tax assets / (liabilities) relate to the following: As o f 31 D ecemb er (EUR millio n ) 2012 res ta ted 2013 Deferred income tax liabilities Accelerated depreciation for tax purposes -7-5 Fair value adjustments on acquisition Statutory provisons not retained under IFRS -1-1 Deferred taxation on sales of property, plant and equipment -5-8 Other Gro s s deferred inco me ta x lia bilities Deferred income tax assets Fair value adjustment on fixed assets Remeasurement of financial instruments to fair value 7 3 Liability for post-employment and termination benefits Tax losses carried forward 2 1 Capital losses on investments in subsidiaries 1 1 Other Gro s s d eferred i n co me ta x a s s ets Net deferred income tax assets / (liabilities), when grouped per taxable entity, are as follows : Net deferred inco me ta x lia bility Net d eferred i n co me ta x a s s et The deferred income tax liabilities decreased in 2013 mainly as a result of the amortization of the assets recognized in 2010 in the purchase price allocation of BICS when the Group acquired control. The deferred income tax asset decreased in 2013 as a consequence of the payment of post employment benefits. Deferred tax assets have not been recognized in respect of the losses of subsidiaries that have been loss-making for several years. Cumulative tax losses carried forward and tax deductions available for such companies amounted to EUR 283 million at 31 December 2013 (EUR 257 million in 2012) of which EUR 205 million has no expiration date, EUR 18 million and EUR 24 million expire respectively in 2014 and 2015 and EUR 36 million has a longer expiration date. The share of Belgacom in the undistributed retained profit of subsidiaries amounts to EUR 4,524 million at 31 December 2013 (EUR 4,938 million in 2012) and is taxable at an effective tax rate of 1.7% upon profit distribution to the parent company No deferred tax liability is recorded for temporary differences associated with investments in subsidiaries except when the parent company controls the reversal of the temporary difference and it is probable that the difference will be reversed in a foreseeable future. 55

225 In the income statement, deferred tax income/ (expense) relate to the following: Yea r en d ed 31 D ecemb er (EUR millio n ) 2012 res ta ted 2013 Relating to deferred income tax liabilities Accelerated depreciation for tax purposes 1 2 Fair value adjustments on acquisition Statutory provisons not retained under IFRS -1-1 Deferred taxation on sales of property, plant and equipment 0-3 Other 18-3 Relating to deferred income tax assets Fair value adjustment on fixed assets 0-5 Remeasurement of financial instruments to fair value -2-4 Liability for post-employment and termination benefits Tax losses carried forward -7 0 Other 10-4 D eferred ta x exp en s e o f the yea r 6-23 The consolidated income statement includes the following tax expense: As o f 31 D ecemb er (EUR millio n ) 2012 res ta ted 2013 Current income tax Current income tax expense Adjustments in respect of current income tax of previous periods Deferred income tax Expense resulting from changes in temporary differences Expense resulting from use of tax losses carried forward and tax credits -7 0 In co me ta x exp en s e rep o rted i n co n s o li d a ted i n co me s ta temen t The reconciliation of income tax expense applicable to income before taxes at the statutory income tax rate to income tax expense at the group's effective income tax rate for each of the two years ended is as follows: As o f 31 D ecemb er (EUR millio n ) 2012 res ta ted 2013 In co me b efo re ta xes At Belgian statutory income tax rate of 33.99% Lower income tax rates of other countries -1-1 Income tax consequences of capital losses on investments in subsidiaries Non-taxable income from subsidiaries and notional interest deduction Non-deductible expenditures for income tax purposes Other In co me ta x exp en s e Effective inco me ta x ra te % 20.65% The effective tax rate was 20.7% for 2013, this is slightly above the effective rate of 19.5% for the year 2012 which included an accelerated use of tax losses. The 2013 tax rate results from the application of the general principles of Belgian tax law. The non-taxable income from subsidiaries and notional interest deduction mainly relates to the application of general principles of tax law. Non-deductible expenditures for income tax purposes primarily relate to various expenses that are disallowed for tax purposes and unrecognized tax losses carried forward. Note 9. Assets and liabilities for pensions, other post-employment benefits and termination benefits Belgacom applies IAS 19 as revised in 2011 that is applicable as from 1st January 2013 with retrospective application. This means that the opening balance sheet of 2012 and the year 2012 have been restated. The major changes relate to the recognition of actuarial gains and losses and the alignment of the expected rate of return on plan assets to the discount rate. The Group has several plans that are summarized below: (EUR millio n ) As o f 1 Ja n u a ry 2012 res ta ted As o f 31 D ecemb er res ta ted Termination benefits and additional compensations in respect of restructuring programs Defined benefit plans for complementary pension plans (net liability) Post-employment benefits other than pensions Other liabilities Net li a b i li ty reco g n i zed i n the b a la n ce s heet The calculation of the liability is based on the assumptions established at the balance sheet date. The assumptions for the various plans have been determined based on both macro-economic factors and the specific terms of each plan relating to the duration and the beneficiary population, in order to apply the most relevant measure of estimated outflow of resources. 56

226 The discount rate used for the valuation of pension plans, other post-employment benefit plans and termination benefits is based on the yield of Eurozone high quality corporate bonds with a duration matching the duration of such plans. Publicly available yield curves for such type of bonds are usually limited to 10 years horizon. For longer durations, such as for the complementary pension plans and other post-employment benefits, although no yield curve is directly available, the depth of the market is sufficient to allow the determination of a discount rate for IAS 19 purposes. Belgacom estimates the appropriate discount rate on the basis of available market data. Estimations provided by independent third parties are used for validation purpose. These third party estimations are mainly based on two different methodologies.and the retained discount rate falls within the interval of the results of these methodologies. The first methodology consists in building a synthetic yield curve on the basis of the existing high quality corporate bonds. The second methodology consists in combining the risk-free rate for the duration with a credit risk premium to reflect the spread of high quality corporate bonds versus the risk free rate. Note 9.1. Termination benefits and additional compensations in respect of restructuring programs Termination benefits and additional compensations included in this chapter relate to employee restructuring programs. No plan assets are accumulated for these benefits. In 2005, the Group implemented a leave program and a career outphasing program (tutorship). Under the terms of the plan, the Group will pay benefits until the year In 2007, the Group implemented a voluntary external mobility program to the Belgian State for its statutory employees and a program for unfit statutory employees. Under the terms of this plan, the Group will pay benefits until retirement date of the participant. In 2012, the liability increased with EUR 15 million via non-recurring expenses (see note 28) as a result of change in the legal pension age and new entrants in the plan. Any subsequent re-measurement of the liability for termination benefits and additional compensations is recognized immediately in the income statement. The funded status of the plans for termination benefits and additional compensations is as follows : As o f 1 Ja nua ry As o f 31 D ecemb er (EUR millio n) 2012 res ta ted 2012 res ta ted 2013 Defined Benefit Obligation Plan assets at fair value B enefi t o b li g a ti o n i n exces s o f p la n a s s ets The movement in the net liability recognized in the balance sheet is as follows : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 At the beginning of the year Total expense for the period 22 2 Actual employer contribution At the en d o f the yea r The liability for termination benefits and additional compensations was determined using the following assumptions: As o f 31 D ecemb er res ta ted Discount rate 0.00% % 0.00% % Future price inflation 2.00% 2.00% Sensitivity analysis An increase or decrease of 0.5% in the effective discount rate involves a fluctuation of the liability by approximately EUR 1 million. The Group expects to pay an amount of EUR 51 million for termination benefits and additional compensations in Note 9.2. Defined contribution and benefit plans for complementary pensions Defined contribution plans The Group has some plans based on contributions for qualifying employees. For most of the plans which are operated abroad, the Group does not guarantee a minimum return on the contribution. These plans are not material for the Group Defined benefits plans Belgacom SA and some of its Belgian subsidiaries have a joint complementary defined benefit pension plan for their employees. This plan provides pension benefits for services as of 1 January It provides a benefit based on salary and years of service. It is financed through the Belgacom Pension Fund, a legally separate entity created in 1998 for that 57

227 purpose. The financing method is intended to finance the current value of future pension obligations (defined benefit obligation DBO) relating to the years of service already rendered in the company and taking into account future salary increase. The financing method is derived from calculations under IAS 19 standard before revision The annual contribution is equal to the sum of the service cost, the net financial cost (interest cost on DBO minus the expected return on assets) and the amortization of actuarial gains and losses exceeding the 10% corridor. At 31 December 2012 and in 2013, the assets of the Pension Fund exceed the minimum required by the pension regulator, being the technical provision. The technical provision represents the amount needed to guarantee the short-term and long-term equilibrium of the Pension Fund. It is constituted of the vested rights increased with an additional buffer amount in order to guarantee the long-term durability of the pension financing. The vested rights represent the current value of the accumulated benefits relating to years of service already rendered in the company and based on current salaries. They are calculated in accordance with the pension rules and applicable law fixing actuarial assumptions. As for most of defined benefit plans, the pension cost can be impacted (positively or negatively) by parameters such as interest rates, future salary increase, inflation and return on assets. These risks are not unusual for defined benefit plans. The investment strategy of the Pension Fund is defined with a view to offer the best return on investment, within the strict limits of risk control and taking into account the profile of the pension obligations. The relatively long duration of the pension obligations (17 years) allows to allocate a reasonable portion of its portfolio to equities. Telindus BV, a subsidiary established in the Netherlands, has a complementary defined benefit pension plan for its employees which is changed from a final pay to an average pay scheme applicable as from 2014 and is financed through an insurance company. This plan is not material for the Group. For all pension plans, the actuarial valuations are carried out at 31 December by external independent actuaries. The present value and the current service cost and past service cost, are measured using the projected unit credit method. The funded status of the pension plans is as follows : (EUR mi lli o n) 01/01/2012 res ta ted Defined Benefit Obligation Plan assets at fair value D efi ci t / (s urp lus ) As o f 31/12/2012 res ta ted 31/12/2013 The components recognized in the income statement and other comprehensive income are as follows : Yea r en d ed 31/12/ /12/2013 (EUR mi lli o n ) res ta ted Current service cost - employer Net interest 1 2 Past service cost recognized 0-1 Reco g n i zed i n the i n co me s ta temen t Remea s urements Actuarial gains and losses from changes in financial assumptions 31-9 Actuarial gains and losses arising from experience adjustments 4-1 (Return) on assets, excluding interest income Reco g n i zed i n o ther co mp rehen s i ve i n co me To ta l The movement in the net liability recognized in the balance sheet is as follows : (EUR mi lli o n ) Yea r en d ed 31/12/ /12/2013 res ta ted At the beginning of the year Expense for the period recognized in the income statement Remeasurement recognized in other comprehensive income Actual employer contribution Net d efi ci t

228 Change in plan assets : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 At the beginning of the year Interest income Return on assets, excluding interest income 22 9 Actual employer contribution Benefits payments and expenses -7-6 At the en d o f the yea r Change in the defined benefit obligation : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 At the beginning of the year Service cost Interest cost Benefits payments and expenses -7-6 Actuarial (gains) / losses At the en d o f the yea r The pension liability was determined using the following assumptions : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 Discount rate 4.00% 4.00% Future price inflation 2.00% 2.00% Nominal future salary increase 2.00% % 2.00% % Nominal future baremic salary increase 3.00% % 3.00% % Sensitivity analysis Significant actuarial assumptions for the determination of the defined benefit plans obligations are discount rate, inflation and real salary increase. The sensitivity analysis has been determined based on reasonably possible changes of the respective assumptions, while holding the other assumptions constant. If the discount rate changes by 1%, the estimated impact on the defined benefit obligation would be a decrease or increase by around 15%. If the inflation rate varies by 0.25%, the defined benefit obligation would decrease or increase by around 4%. If the real salary increase varies with 0.25%, the defined benefit obligation would decrease or increase by around 10%. The assets of the pension plans are detailed as follows: As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 Equity instruments 43.10% 46.10% Debt instruments 40.30% 36.50% Convertible bonds 9.70% 9.60% Other (property, infrastructure, Private equity funds, insurance deposits) 6.90% 7.80% Nearly all investments are done via mutual investment funds or insurance deposits. Direct investments amount for less than 1% of the assets. Virtually all equity instruments, debt instruments and convertible bonds have quoted prices in active markets. The other assets, amounting for 7.8% of the portfolio are not quoted. The Pension Fund does not directly invest in Belgacom shares or bonds, but it is not excluded that some Belgacom shares or bonds are included in some of the mutual investment funds in which we invest. The Group expects to contribute an amount of EUR 36 million to these pension plans in Note 9.3. Post-employment benefits other than pensions Historically, the Group grants to its retirees post-employment benefits other than pensions in the form of socio-cultural aid premium and other social benefits including hospitalization. There are no plan assets for such benefits. The hospitalization plan is based on an indexed lump sum per beneficiary. The funded status of the plans is as follows : (EUR millio n) As o f 1 Ja nua ry As o f 31 D ecemb er res ta ted res ta ted Defined Benefit Obligation Plan assets at fair value Net li a b i li ty reco g ni zed i n the b a la nce s heet

229 The components recognized in the income statement and other comprehensive income are as follows : Yea r en d ed 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 Current service cost - employer 2 3 Interest cost Reco g n i zed i n the i n co me s ta temen t Remea s urements Actuarial gains and losses from changes in financial assumptions 53 0 Effect of experience adjustments 6 1 Reco g n i zed i n o ther co mp rehen s i ve i n co me 59 1 To ta l The movement in the net liability recognized in the balance sheet is as follows : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 At the beginning of the year Expense for the period recognized in the income statement Remeasurement recognized in other comprehensive income 59 1 Actual employer contribution At the en d o f the yea r Change in the defined benefit obligation : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 At the beginning of the year Service cost 2 3 Interest cost Distributions to beneficiaries Actuarial (gains) / losses 59 1 At the en d o f the yea r The liability for post-employment benefits other than pensions was determined using the following assumptions : As o f 31 D ecemb er res ta ted Discount rate 3.50% 3.50% Future cost trend (index included) 2.00% 2.00% Mortality MR/FR -2 MR/FR -2 The liability for post-employment benefits other than pensions is determined based on the entity s best estimate of the financial and demographic assumptions which are reviewed on an annual basis. The average duration of the obligation is 13 years. Sensitivity analysis Significant actuarial assumptions for the determination of the defined benefit plans obligations are discount rate, inflation, future cost trend and mortality. The sensitivity analysis has been performed based on reasonably possible changes of the respective assumptions, while holding the other assumptions constant. If the discount rate changes by 1%, the defined benefit obligation would decrease or increase by around 12%. If the future cost trend varies by 1%, the defined benefit obligation (excluding medical cost) would decrease or increase by around 7%. If the future medical cost trend varies by 1%, the related defined benefit obligation would decrease or increase by around 5%. If the mortality correction age (MR/FR -2) changes with 1 year (to MR/FR -3), the defined benefit obligation would increase by around 3%. The Group expects to contribute an amount of EUR 16 million to these plans in Note 9.4. Other liabilities The Group has a legal obligation to pay child allowance benefits to a limited number of statutory retirees and to the beneficiaries of the employee restructuring programs. Telindus France has a legal obligation to pay a one-time post-employment benefit in accordance with local law in France. 60

230 Those amounts are directly paid by the Group and therefore no plan assets are accumulated for such benefits. Any subsequent re-measurement of the liability is recognized immediately in the income statement. The funded status is as follows : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 Defined Benefit Obligation Plan assets at fair value 0 0 Net li a b i li ty reco g n i zed i n the b a la n ce s heet The liability was determined using the following assumptions : As o f 31 D ecemb er (EUR mi lli o n ) 2012 res ta ted 2013 Discount rate 3.00% 2.30%-3.00% Future price inflation 2.00% 2.00% Note 10. Other non-current assets As o f 31 D ecemb er (EUR millio n) No te Other derivatives Other financial assets Other assets To ta l Note 11. Inventories As o f 31 D ecemb er (EUR millio n) Raw materials, consumables and spare parts Work in progress and finished goods Goods purchased for resale To ta l Inventory is reported net of allowances for obsolescence. Note 12. Trade receivables Most trade receivables are non-interest bearing and are usually on days terms. Terms are somehow longer for the receivables of the International Carrier Services segment, since major part of its trade receivables on other Telco operators are paid via netting agreements. The analysis of trade receivables that were past due but not impaired is as follows: As o f 31 D ecemb er Gro s s recei va b les Allo wa n ce fo r d o u b tfu l d eb to rs Net ca rryi n g a mo u n t Nei ther p a s t d u e n o r i mp a i red Past due but not impaired (EUR million ) < 30 days days days days days > 360 days , , , , , , As of 31 December 2012 and 2013, respectively 69% and 74% of the net carrying amount of the trade receivables were neither past due nor impaired. For the two years presented, no trade receivables were pledged as collaterals. In 2013, Belgacom Group received bank and parent guarantees of EUR 9 million (in 2012 EUR 7 million) as securities for the payment of outstanding invoices. The evolution of the allowance for doubtful debtors is as follows: (EUR millio n) No te As o f 1 Ja nua ry Decrease / (increase) posted in operating expenses Variation due to subsidiary classified as assets held for sale 0 1 Other movements 3 2 As o f 31 December

231 Note 13. Other current assets As o f 31 D ecemb er (EUR millio n) No te VAT receivables Other derivatives Prepaid expenses Other receivables To ta l Note 14. Investments As o f 31 D ecemb er (EUR millio n) Note Deposits Treasury certificates Shares in Funds To ta l Investments include shares in funds and mutual funds, treasury certificates and deposits with an original maturity greater than three months but less than one year. As o f 31 D ecemb er (EUR millio n) Cost Net ca rryi ng a mo unt Note 15. Cash and cash equivalents As o f 31 D ecemb er (EUR millio n) Fixed income securities Short-term deposits Cash at bank and in hand To ta l The Group invests part of its liquidities in treasury certificates held-to-maturity. Short-term deposits are made for periods varying between one month and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates. Cash at bank earns interest at floating rates based on daily bank deposit rates. Note 16. Assets classified as held for sale In December 2013, the Group entered into an agreement to dispose Sahara Network Company Limited registered in Damman, Kingdom of Saudi Arabia, which is engaged in telecommunication and information technology business. Also in December 2013, an agreement was reached on the disposal of the business of Scarlet NV, a telecommunication service provider in the Netherlands, in the context of a liquidation of this company. On 31 December 2013, the criteria to classify both entities as held for sale were met leading to the recognition of impairment losses for EUR 22 million (of which EUR 17 million through non-recurring expenses) as the proceeds for both transactions will be lower than the carrying amount of the related assets and associated liabilities. Both transactions are expected to be completed in first half of 2014 after fulfillment of conditions precedent, on which date the control of the operations will pass to the acquirers. The major classes of assets and liabilities of the related businesses at the end of the reporting period are as follows: As o f 31 D ecemb er (EUR millio n ) 2013 Goodwill 1 Property, plant and equipment 2 Trade receivables 6 Other current receivables 2 As s ets o f the d i s p o s a l g ro u p s 11 Non current liabilities -2 Current liabilities -11 Li a b i li ti es a s s o ci a ted wi th the d i s p o s a l g ro u p -13 Net li a b i li ti es o f the b u s i n es s es cla s s i fi ed a s held fo r s a le -2 62

232 Note 17. Equity Note 17.1 Shareholders equity At 31 December 2013, the share capital of Belgacom SA amounted to EUR 1 billion (fully paid up), represented by 338,025,135 shares, with no par value and all having the same rights, provided such rights are not suspended or cancelled in the case of treasury shares. The Board of Directors of Belgacom SA is entitled to increase the capital for a maximum amount of EUR 200 million. The Company may acquire its own shares and transfer the shares thus acquired in accordance with the provisions of the Commercial Companies Code. The Board of Directors is empowered by article 13 of the Articles of Association to acquire the maximum number of own shares permitted by law. The price paid for these shares must not be more than five percent above the highest closing price in the thirty-day trading period preceding the transaction nor more than ten percent below the lowest closing price in that same thirty-day period. Said authorization is granted for a period of five years starting on 8 April Distribution of retained earnings of Belgacom SA, the parent company, is limited by a restricted reserve built up in prior years in accordance with Belgian Company Law up to 10% of Belgacom s issued capital. Belgacom SA has a statutory obligation to distribute 5% of the parent company income before taxes to its employees. In the accompanying consolidated financial statements, this profit distribution is accounted for as personnel expenses. On 31 December 2013, the number of treasury shares amounts to 18,820,954 of which 4,148,478 entitled to dividend rights and 14,672,476 without dividend rights. Dividends allocated to treasury shares entitled to dividend rights are accounted for under the caption Reserves not available for distribution in the statutory financial statements of Belgacom SA. In 2012 and 2013, the Group sold respectively 208,433 and 219,935 treasury shares to its senior management for EUR 3 million under discounted share purchase plans at a discount of 16.70% (see note 36). During the years 2012 and 2013, employees exercised respectively 464,411 and 662,581 share options. In order to honor its obligation in respect of these exercises, Belgacom used treasury shares (see note 36). In 2013, no share options were granted by the Group to its key management and senior management. In 2012, the Group granted 840,732 share options to its key management and senior management with an exercise price of EUR (see note 36). In 2012 Belgacom converted 612,356 treasury shares without dividend rights into treasury shares entitled to dividend rights in order to cover the outstanding stock options with dividend rights. Number of shares (including treasury shares): As o f 1 Ja nua ry 338,025, ,025,135 As o f 31 Decemb er 338,025, ,025,135 Number of treasury shares: As o f 1 Ja nua ry 20,376,314 19,703,470 Sale under a discounted share purchase plan -208, ,935 Exercice of stock option -464, ,581 As o f 31 Decemb er 19,703,470 18,820,954 Note 17.2 Non-controlling interests Non-controlling interests include The 42.4% of the minority shareholders (Swisscom and MTN Dubai) into BICS as from 1 January 2010; The 30% stake of the minority shareholder in the equity and net income of Sahara Net LCC; The 35.30% stake of the minority shareholder Arcelor Mittal in the equity and net income of Telindus SA (established in Luxembourg) and subsidiaries (see note 6). 63

233 Note 18. Interest-bearing liabilities Note 18.1 Non-current interest-bearing liabilities As o f 31 D ecemb er (EUR mi lli o n) No te Unsubordinated debentures 1,672 1,919 Leasing and similar obligations 2 2 Other derivatives To ta l 1,761 1,950 All long term debt is unsecured. During 2012 and 2013 there have been no defaults or breaches on loans payables. Over the two years presented, interest rate swaps (IRS) and interest rate and currency swaps (IRCS) were used to manage the currency and interest rate exposure on the JPY unsubordinated debentures. The swaps enabled the Group to transform the interest rate on these debentures from a fixed interest rate to a floating interest rate or vice versa. Unsubordinated debentures in EUR and in JPY are issued by Belgacom SA. The capital is repayable in full on the maturity date. In March 2013 the Group issued a fifteen-year unsubordinated bond of EUR 150 million under the Euro Medium Term Note program and in May 2013 a ten year unsubordinated bond of 100 million partially offsetting the reimbursement of a loan maturing in December 2013, for a nominal amount of EUR 125 million. The foreign currency exposure on liabilities in JPY is fully hedged economically by interest rate and currency swaps converting these liabilities in JPY into liabilities in EUR (see note 33). Non-current interest-bearing liabilities as of 31 December 2013 are summarised as follows: Ca rryi n g a mo u n t Non -current interest-bearing liabilities No mi n a l a mo u n t Mea s u remen t u n d er IAS 39 Ma tu ri ty d a te In teres t p a ymen t / rep ri cea b le In teres t ra te p a ya b le (EUR million ) (EUR million ) (b ) Effecti ve interest rate Unsubordinated debentures Floating rate borrowings JPY (a) Amortized cost Dec-26 Semi-annually 0.20% 0.20% Fixed rate borrowings EUR Amortized cost Nov-16 Annually 4.38% 4.50% EUR Amortized cost Nov-16 Annually 4.38% 7.16% EUR Amortized cost Feb-18 Annually 3.88% 4.05% EUR Amortized cost Mar-28 Annually 3.19% 3.22% EUR Amortized cost May-23 Annually 2.26% 2.29% 1,6 80 1,700 JPY (a) Amortized cost Nov-15 Annually 6.18% 6.18% JPY (a) Amortized cost Dec-15 Annually 6.21% 6.21% Total unsubordinated debentures 1,919 1,917 Leasing and similar obligations EUR 2 2 Amortized cost 2017 Quarterly 4.88% 4.88% 2 2 Total non -current financial liabilities (derivatives excluded ) 1,921 1,919 D eri va ti ves Derivatives held-for-trading (c) 28 0 Fair value To ta l 1, ,9 19 Current portion of interest-bearing -liabilities > 1 year Leasing and similar obligations Fixed rate borrowings EUR 2 2 Amortized cost 2017 Quarterly 4.88% 4.88% To ta l 2 2 (a) converted into a loan in EUR via currency interest rate swap (b) for floating rate borrowings, interest rate is the one prevailing at the last repricing date before 31 December 2013 (c) economic hedges of JPY borrowings 64

234 Non-current interest-bearing liabilities as of 31 December 2012 are summarised as follows: Ca rryi n g a mo u n t Non -current interest-bearing liabilities Note 18.2 Current interest-bearing liabilities No mi n a l a mo u n t Mea s u remen t u n d er IAS 39 Ma tu ri ty d a te In teres t p a ymen t / rep ri cea b le In teres t ra te p a ya b le (EUR million ) (EUR million ) (b ) Effecti ve interest rate Unsubordinated debentures Floating rate borrowings JPY (a) Amortized cost Dec-26 Semi-annually 0.14% 0.14% Fixed rate borrowings EUR Amortized cost Nov-16 Annually 4.38% 4.50% EUR Amortized cost Nov-16 Annually 4.38% 7.16% EUR Amortized cost Feb-18 Annually 3.88% 4.05% 1,425 1,45 0 JPY (a) Amortized cost Nov-15 Annually 6.18% 6.18% JPY (a) Amortized cost Dec-15 Annually 6.21% 6.21% Total unsubordinated debentures 1,672 1,667 Leasing and similar obligations EUR 2 2 Amortized cost 2016 Quarterly 4.72% 4.72% 2 2 Total non -current financial liabilities (derivatives excluded ) 1,674 1,670 D eri va ti ves Derivatives held-for-trading (c) 87 0 Fair value To ta l 1,76 1 1,6 70 Current portion of interest-bearing -liabilities > 1 year Unsubordinated debentures Fixed rate borrowings EUR Amortized cost Dec-13 Annually 6.00% 6.11% Leasing and similar obligations Fixed rate borrowings EUR 2 2 Amortized cost 2016 Quarterly 4.72% 4.72% Credit institutions Fixed rate borrowings EUR 4 4 Amortized cost Nov-13 Semi-annually 3.78% 3.78% To ta l (a) converted into a loan in EUR via currency interest rate swap (b) for floating rate borrowings, interest rate is the one prevailing at the last repricing date before 31 December 2012 (c) Economic hedges of JPY borrowings As o f 31 D ecemb er (EUR mi lli o n ) Current portion of amounts payable > 1 year Unsubordinated debentures Leasing and similar obligations 2 2 Credit institutions 4 0 Other financial debts Other loans To ta l

235 Note 19. Provisions (EUR mi lli o n ) Wo rkers ' a cci d en ts Li ti g a ti o n Illn es s d a ys Other Ob li g a ti o n s To ta l As o f 1 Ja n u a ry Additions Utilisations Withdrawals Unwinding and change in discount rate As o f 31 D ecemb er Additions Utilisations Withdrawals Unwinding As o f 31 D ecemb er The provision for workers accidents relates to compensation that Belgacom SA could pay to members of personnel injured (including professional illness) when performing their job and on their way to work. Until 31 December 2002, according to the law of 1967 (public sector) on labor accidents, compensation was funded and paid directly by Belgacom. This provision (annuities part) is based on actuarial data including mortality tables, compensation ratios, interest rates and other factors defined by the law of 1967 and calculated with the support of a professional insurer. Taking into account the mortality table, it is expected that most of these costs will be paid out until As from 1 January 2003, contractual employees are subject to the law of 1971 (private sector) and statutory employees remain subject to the law of 1967 (public sector). For both the contractual and statutory employees, Belgacom is covered as from 1 January 2003 by insurance policies for workers accidents and therefore will not directly pay members of personnel. The provision for litigation represents management s best estimate for probable losses due to pending litigation where the Group has been sued by a third party or is subject to a judicial or tax dispute. The expected timing of the related cash outflows depends on the progress and duration of the underlying judicial procedures. The provision for illness days represents management s best estimate of probable charges related to the granting by Belgacom of accumulating non-vesting illness days to its statutory employees. The provision has been determined based on statistical data. The provision for other obligations mainly include the expected costs for dismantling and restoration of mobile antenna sites and sites where payphones are installed, environmental risks and sundry risks. It is expected that most of these costs will be paid during the period The provision for restoration costs is estimated at current prices and discounted using a discount rate that varies between 0% and 4%, depending the expected timing to settle the obligation. Note 20. Other non-current payables As o f 31 D ecemb er (EUR millio n) No te Other derivatives Other amounts payable To ta l In December 2013, Belgacom acquired a license for the 800 Mhz spectrum for an amount of EUR 120 million payable by installments over a 20 years period. The related amount that will be settled after more than twelve months (Eur 107 million) is included in other non current payables. The fair value of this amount approximates its nominal value. 66

236 Note 21. Other current payables As o f 31 D ecemb er (EUR millio n ) No te VAT payables Payables to employees Accrual for holiday pay Accrual for social security contributions Advances received on contracts Other taxes Deferred income Other derivatives Accrued expenses Other debts To ta l Deferred income mainly includes prepaid telecommunication and ICT services. Other debts mainly relate to amounts collected on behalf of third parties and the annual installment of the 800 Mhz license that will be paid in 2014 (EUR 6 million). Note 22. Net revenue Yea r end ed 31 D ecemb er (EUR mi lli o n) Sales of goods Rendering of services 5,789 5,596 To ta l 6,415 6,239 As a consequence of the new Belgian Telecom law in force as from October 1, 2012 criteria allowing deferral in time of discounts on Proximus mobile contracts were no longer met. Therefore the accumulated deferred discounts (EUR 12 million) were reversed in reduction of revenue in Note 23. Other operating income Yea r end ed 31 D ecemb er (EUR mi lli o n) Gain on disposal of intangible assets and property, plant and equipment 5 33 Miscellaneous reinvoicing and recovery of expenditures Other income To ta l Other income includes compensation for network damages as well as employee and third party contributions for sundry services and capital gains on sale of technical buildings in the framework of the network simplification program. 67

237 Note 24. Non-recurring income Gains on the disposal of subsidiaries and joint-ventures are reported as non-recurring income when they individually exceed EUR 5 million. There was no non-recurring income in 2012 and Note 25. Costs of materials and services related to revenue Yea r end ed 31 D ecemb er (EUR mi lli o n) Purchases of materials Purchases of services 2,173 2,120 To ta l 2,611 2,561 Purchases of materials are shown net of work performed by the enterprise that is capitalized for an amount of EUR 83 million in 2013 and EUR 103 million in As a consequence of the new Belgian Telecom law in force as from October 1, 2012 criteria allowing deferral in time of sales commissions for Proximus mobile contracts were no longer met. Therefore the accumulated deferred commissions (EUR 22 million) were reversed into cost of materials and services related to revenues in Note 26. Personnel expenses and pensions Yea r en d ed 31 D ecemb er (EUR mi lli o n ) res ta ted Salaries and wages Social security expenses Pension costs Post-employment benefits other than pensions and termination benefits 2 8 Other personnel expenses To ta l 1,126 1,142 Salaries and wages and social security expenses are shown net of work performed by the enterprise that is capitalized for an amount of EUR 89 million in 2013 and EUR 78 million in Note 27. Other operating expenses Yea r en d ed 31 D ecemb er (EUR mi lli o n ) Rent expense Maintenance and utilities Advertising and public relations Consultancy Administration and training Telecommunications, postage costs and office equipment Outsourcing Allowances for trade debtors 9-8 Loss on realization of trade debtors Impairment on intangible assets and property, 4 1 Taxes other than income taxes Other operating charges (1) To ta l (1) Including unrealized and realized net exchange losses amounting to EUR 2 million in 2012 and none in 2013 The operating expenses are shown net of work performed by the enterprise that is capitalized for an amount of EUR 174 million in 2013 and EUR 155 million in

238 Note 28. Non-recurring expenses Yea r end ed 31 D ecemb er (EUR mi lli o n) res ta ted Impairment loss on disposal group classified as held for sale 0 17 Termination benefits and additional compensation 15-2 Settlements of Post employment benefits 0-1 To ta l Losses on the disposal of subsidiaries and joint-ventures that individually exceed EUR 5 million, costs of restructuring programs, the effect of settlements of post-employment benefit plans are recognized as non-recurring expenses. In 2012 and 2013 the Group reviewed the estimation of the liability for termination benefits resulting in a non-recurring expense of respectively EUR 15 million in 2012 and EUR -2 million in (see note 9.1) In 2013 the group recognized an impairment loss on reclassification of a disposal group as held for sale for EUR 17 million. Note 29. Depreciation and amortization Yea r end ed 31 D ecemb er (EUR mi lli o n) Amortization of licenses and other intangible assets Depreciation of property, plant and equipment To ta l The useful life for modems and decoders was increased from 24 to 36 months. This had a positive impact on depreciation expenses of EUR 9 million. Note 30. Net finance income / (costs) Yea r en d ed 31 D ecemb er (EUR mi lli o n ) res ta ted Finance income Interest income on financial instruments At amortized cost 2 2 At fair value through income statement 2 0 Interest income on assets On receivables 2 2 Gain on disposal of Associates 1 0 Fair value adjustments of financial instruments Not in a hedge relationship 7 11 Other finance income 2 2 Finance costs Interests and debt charges on financial instruments At amortized cost At fair value through income statement On provisions -4-4 On termination benefits On long term payables -1-1 Impairment losses On other participating interests Fair value adjustments of financial instruments Not in a hedge relationship -1 0 Other finance costs -4-4 To ta l

239 Note 31. Earnings per share Basic earnings per share are calculated by dividing the net income for the year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share is calculated by dividing the net income for the year attributable to ordinary shareholders, by the weighted average number of ordinary shares outstanding during the year, both adjusted for the effects of dilutive potential ordinary shares. The following table reflects the income and share data used in the computation of basic and diluted earnings per share. Yea r en d ed 31 D ecemb er (i n mi lli o n s, excep t p er s ha re a mo u n ts ) res ta ted Net income attributable to ordinary shareholders (EUR million) Adjusted net income for calculating diluted earnings per share (EUR million) Weighted average number of outstanding ordinary shares 318,011, ,759,360 Adjustment for share options 677, ,352 Weighted average number of outstanding ordinary shares for diluted earnings per share 318,688, ,987,711 Basic earnings per share (EUR) Diluted earnings per share (EUR) The stock options granted in 2004, 2007, 2008, 2010, 2011 and 2012 are anti-dilutive and hence not included in the calculation of diluted earnings per shares, while the other options granted are dilutive. Note 32. Dividends paid and proposed (i n mi lli o n s, excep t p er s ha re a mo u n ts ) Dividends on ordinary shares: Proposed dividends (EUR million) Number of outstanding shares with dividend rights 318,321, ,204,181 Dividend per share (EUR) Interim dividend paid to the shareholders (EUR million) Interim dividend per share (EUR) The proposed dividends for 2012 have been effectively paid in April The interim dividend of 2012 was a combination of normal interim dividend (EUR 0.50 gross per share) and a one-time extra interim dividend (of EUR 0.31 per share) since Belgacom opted for an extra dividend instead of returning the EUR 100 million outstanding as a share buyback. The interim dividends for 2013 have been paid in December An amount of EUR 6 million was paid in 2013 at the time of exercise of stock options and corresponds to the accumulated dividends attached to the SOP since their granting. 70

240 Note 33. Additional disclosures on financial instruments Note Derivatives The Group makes use of derivatives such as interest rate swaps (IRS), interest rate and currency swaps (IRCS), forward foreign exchange contracts and currency options. (EUR mi lli o n ) No te Non-current assets Other derivatives - interest related Current assets Other derivatives To ta l a s s ets Non-current liabilities Other derivatives - interest related Derivatives held-for-hedging - non-interest-bearing liabilities Current liabilities Derivatives held-for-hedging - non-interest-bearing liabilities 0 2 Other derivatives To ta l li a b i li ti es The tables below show the positive and negative fair value of derivatives, included in the balance sheet respectively as current/non-current assets or liabilities, together with the notional amounts presented by the term of maturity. As of 31 December 2013 Fair value Notional amount (1) (EUR million ) Within over 5 Total As s et Liability 2 months months years years Commodity swap Derivatives qualifying as cas h flow hedges Interest rate swaps Interest rate and currency swaps Interests and currency related - other derivates Forward foreign exchange contracts Derivatives not qualifying as hedges (1) To ta l (1) The sign "+" refers to notional amounts to be cashed in and the sign "-" to notional amounts to be cashed out. As of 31 December 2012 Fair value Notional amount (1) (EUR million ) Within over 5 Total As s et Liability 2 months months years years Commodity swap Derivatives qualifying as cas h flow hedges Interest rate swaps Interest rate and currency swaps Interests and currency related - other derivates Forward foreign exchange contracts Derivatives not qualifying as hedges (1) To ta l (1) The sign "+" refers to notional amounts to be cashed in and the sign "-" to notional amounts to be cashed out. 71

241 Note 33.2 Financial risk management objectives and policies The Group s main financial instruments comprise unsubordinated debentures, trade receivables and trade payables. The main risks arising from the Group s use of financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk. The Group is also exposed to financial risks associated with forecasted transactions. All financial activities are subject to the principle of risk minimization. To achieve this, all matters related to funding, foreign exchange, interest rate and counterparty risk management are handled by a centralized Group Treasury department. Simulations are performed using different market (including worst case) scenarios with a view to estimating the effects of varying market conditions. All financial transactions and financial risk positions are managed and monitored in a centralized treasury management system. Group Treasury operations are conducted within a framework of policies and guidelines approved by the Board of Directors. Group Treasury is responsible for implementing these policies. According to the policies, derivatives are used to hedge interest rate and currency exposures. Derivatives are used exclusively as hedging instruments, i.e., not for trading or other speculative purposes. Derivatives used by the Group mainly include forward exchange contracts, interest rate swaps, interest rate and currency swaps and future rate agreements (FRA s). The Group s internal auditors regularly review the internal control environment at Group Treasury. No material changes occurred during the period in the nature of the exposure of the Group to financial risks nor in the Group s policies and processes for managing financial risk. Interest rate risk The Group s exposure to changing market interest rates primarily relates to its long-term financial obligations. Group Treasury manages exposure of the Group to changes in interest rates and the overall cost of financing by using a mix of fixed and variable rate debts, in accordance with the Group s financial risk management policies. The aim of such policies is to achieve an optimal balance between total cost of funding, risk minimization and avoidance of volatility in financial results, whilst taking into account market conditions and opportunities as well as overall business strategy. Accordingly, the company entered into several interest rate swaps (IRS) and interest rate and currency swaps (IRCS) to transform the interest rate exposure on certain financial liabilities from a fixed interest rate to a floating interest rate mechanism or vice versa. These IRS and IRCS derivatives are economic hedges and do not qualify for hedge accounting. The tables below summarize the non-current interest-bearing liabilities (including their current portions, excluding leasing and similar obligations), the interest rate and currency swap agreements (IRCS), the interest rate swap agreements (IRS) and the net currency obligations of the Group at 31 December 2012 and As of 31 December 2013 Direct borrowing IRCS agreements IRS agreements Net currency obligations Notional amount Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) Average time to maturity (EUR million ) (in years ) (EUR million ) (in years ) (EUR million ) (in years ) (EUR million ) (in years ) EUR Fixed 1, % % 2 1, % 4 Variable % % % 13 JPY Fixed % % 6 0 To ta l 1, % , % 5 (1) Weighted average interest rate taking into account last repriced interest rates for floating borrowings. Notional amount Direct borrowing IRCS agreements IRS agreements Net currency obligations Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) Average time to maturity Amount payable (receivable) Weighted average interest rate (1) The Group expects immaterial impacts for 2014 on the income statement resulting from interest payable on floating rate borrowings on the one hand and from measurement at fair value in income statement of some IRS derivatives that do not qualify as hedging instruments on the other hand. Average time to maturity (EUR million ) (in years ) (EUR million ) (in years ) (EUR million ) (in years ) (EUR million ) (in years ) EUR Fixed 1, % % 3 1, % 4 Variable % % % 14 JPY Fixed % % 7 0 To ta l 1, % , % 4 (1) Weighted average interest rate taking into account last repriced interest rates for floating borrowings. As of 31 December

242 Foreign currency risk The Group s main currency exposures result from its operating activities. Such exposure arises from sales or purchases by operating units in currencies other than their respective functional currency. Transactions in currencies other than the functional currency mainly occur in the International Carrier Services ( ICS ) segment whose international carrier activities generate payments to and receipts from other telecommunications operators in various foreign currencies, as well as in some affiliates of the Telindus subgroup running USD denominated operating activities and finally also, in relationship with international activities (roaming, capital and operating expenditure) of the Group. Risks from foreign currencies are hedged to the extent that they are liable to influence the Group s cash flows. Foreign currency risks that do not influence the Group s cash flows (i.e., the risks resulting from the translation of assets and liabilities of foreign operations into the Group s reporting currency) as a rule are not hedged. However, the Group could envisage hedging such so-called translation differences should their potential impact become material to the Group s consolidated financial statements. The typical financial instruments used to hedge foreign currency risk are forward foreign exchange contracts and currency options. In 2012 and 2013, the Group only incurred currency exposures relative to its operating activities. Re-measurement to fair value of underlying open trade positions in foreign currencies as a rule is recorded via the income statement and reduced or offset by the accompanying re-measurement to fair value of derivatives used to hedge such underlying exposures. In a limited number of cases however, hedge accounting has been applied, whereby such re-measurement results are temporarily being recorded on the balance sheet, awaiting final occurrence and settlement of underlying, so-called hedge effective, exposures, when the foreign exchange results ultimately are included in the income statement. The Group performed a sensitivity analysis on the exchange rates EUR/USD, EUR/SDR 20 EUR/GBP, and EUR/CHF, four currency pairs to which it is typically exposed in its operating activities, for the years 2012 and For 2012 and 2013, there was no material impact on the Group s income statement. For 2014, the Group does not expect any material impact of currency fluctuations on its overall financial performance either. This results from timely and adequately hedging such exposures as they surface in the course of business. Credit risk and significant concentrations of credit risk Belgacom is exposed to credit risk from its operating activities and from its financing activities (financial investments done to manage cash of the Group). Credit risk encompasses all forms of counterparty exposure, i.e. where counterparties may default on their obligations to Belgacom in relation to lending, hedging, settlement and other financial activities. The Group s maximum exposure to credit risk (not taking into account the value of any collateral or other security held) in the event the counterparties fail to perform their obligations in relation to each class of recognized financial assets, including derivatives with positive market value, is the carrying amount of those assets in the balance sheet and bank guarantees granted. To reduce the credit risk in respect of financing activities and cash management of the Group, transactions as a rule are only entered into with leading financial institutions whose long term credit ratings equal at least A- (S&P). Credit risk on operating activities with significant clients is managed and controlled on an individualized basis. When needed, the Group requests additional collaterals. These significant customers are however not material to the Group, since the client portfolio of the Group is mainly composed of a large number of small customers. Hence, credit risk and concentration of credit risk on trade receivables is limited. For amounts receivable from other telecommunication companies, the concentration of credit risk is also limited due to netting agreements with accounts payable to these companies, prepayment obligations, bank guarantees, parent guarantees and the use of credit limits obtained via credit insurance. The Group is exposed to credit loss in the event of non-performance by a counterparty on financial derivatives (see note 33.1). However, the Group does not anticipate non-performance by any of these counterparties, seeing it only deals with prime financial institutions. In addition, the Group is exposed to credit risk by occasionally granting financial guarantees. At 31 December 2013, it had granted bank guarantees for an amount of EUR 46 million (and EUR 43 million at 31 December 2012). Liquidity risk In accordance with the treasury policy, Group Treasury manages its overall cost of financing by using a mix of fixed and variable rate debts. A liquidity reserve in the form of credit lines and cash is maintained to guarantee the solvency and financial flexibility of the Group at all times. For this purpose, Belgacom SA entered into bilateral credit agreements with different maturities and into two separate Syndicated Revolving Facilities. For medium to long-term funding, the Group uses bonds and medium term notes. The maturity profile of the debt portfolio is spread over several years. Group Treasury frequently assesses its funding resources taking into account its own credit rating and general market conditions. 20 SDR: Special Drawing Rights: basket of currencies, transactional money used in netting agreements between telecom operators 73

243 The table below summarizes the maturity profile of the Group s unsubordinated debentures as disclosed on note 18 at each reporting date. This maturity profile is based on contractual undiscounted interests payments and capital reimbursements and takes into account the impact on cash flows of interest rate derivatives used to convert fixed interest rate liabilities into floating interest rate liabilities and vice versa. For floating rate liabilities, interest rates used to determine cash outflows are the ones prevailing at their last price fixing date before reporting date (as of 31 December 2012 and 2013, respectively). (EUR millio n ) As o f 31 D ecemb er 2012 Capital Interests Total , As o f 31 D ecemb er 2013 Capital Interests Total , Bank credit facilities at 31 December 2013 In addition to the interest-bearing liabilities disclosed in notes 18.1 and 18.2, the Group is backed by long term credit facilities of EUR 550 million and short term credit facilities of EUR 310 million. These facilities are provided by a diversified group of banks. As at 31 December 2013, there were no outstanding balances under any of these facilities. A total of some EUR 860 million of credit lines was therefore available for drawdown as at 31 December The Group has also established a EUR 2.5 billion Euro Medium Term Note ( EMTN ) Program and a EUR 1 billion Commercial Paper ( CP ) Program. As at 31 December 2013, there was an outstanding balance under the EMTN Program of EUR 1,700 million and EUR 313 million under the CP Program. Note 33.3 Net financial position of the Group and capital management The Group defines the net financial position as the net amount of investments, cash and cash equivalents minus any interest-bearing liabilities and related derivatives (including re-measurement to fair value). The net financial position does not include vendor financing. The outstanding amount from the deferred payment arrangement for the 800 Mhz license, which is classified as other current/non current payables, amounts to EUR 114 million per end 2013 (EUR mi lli o n ) No te As s ets Current investments (1) Cash and cash equivalents (1) Non-current derivatives Li a b i li ti es Non-current interest-bearing liabilities (1) 18-1,761-1,950 Current interest-bearing liabilities (1) Net fi n a n ci a l p o s i ti o n -1,6 01-1,815 (1) after remeasurement to fair value, if applicable. Non-current interest-bearing liabilities include non-current derivatives at fair value amounting to EUR 87 million in 2012 and EUR 28 million in 2013 (see note 18.1). The purpose of the Group s capital management is to maintain net financial debt and equity ratios that allow for security of liquidity at all times via flexible access to capital markets, in order to be able to finance strategic projects and to offer an attractive remuneration to shareholders. The latter was updated by the Belgacom Board of Directors of 25 February 2010 and Belgacom now commits to return, in principle, most of its annual cash flow before financing activities (or Free Cash Flow ), to its shareholders. The return of free cash flow either through dividends or share buybacks will be reviewed on an annual basis, in order to keep strategic financial flexibility for future growth, organically or via selective merger and acquisition projects, with a clear focus on value creation. This also includes confirming appropriate levels of distributable reserves. Over the two years presented, the Group did not issue new shares or any other dilutive instruments. 74

244 Note 33.4 Categories of financial instruments The Group has interest rate and currency swaps (IRCS) to manage the exposure to interest rate risk and to foreign currency risk on its non-current interest bearing liabilities (see note 33.2). The following tables present the Group s financial instruments per category defined under IAS 39, as well as gains and losses resulting from re-measurement to fair value. Based on market conditions at 31 December 2013, the fair value of the unsubordinated debentures, which are accounted for at amortized cost, exceeds by EUR 179 million, or 9%, their carrying amount. The Group does not intend to reimburse these loans before their maturity. The fair values, calculated for each debenture separately, were obtained by discounting the cumulated cash outflows generated by each debenture with the interest rates at which the Group could borrow at 31 December 2013 for similar debentures with the same remaining maturities. As of 31 December 2013 (EUR million ) No te Ca teg o ry a cco rd i n g to IAS 39 (1) Ca rryi n g a mo u n t Amounts recognized in balance sheet according to IAS 39 Amo rti zed co s t Acq u i s i ti o n co s t n et o f i mp a i rmen t losses, if any Fa i r va lu e a d ju s tmen t reco g n i zed i n eq u i ty Fa i r va lu e a d ju s tmen t reco g n i zed i n i n co me s ta temen t ASSETS Non -current assets Other participating interests 7 AFS Other non-current assets Other derivatives 33.1 FVTPL Other financial assets 10 LaR Current assets Trade receivables 12 LaR 1,289 1,289 Other current assets VAT and other receivables 13 N/A Other derivatives 33.1 FVTPL 1 1 Investments 14 AFS Investments 14 HTM Cash and cash equivalents Fixed income securities 14 HTM Short-term deposits 14 LaR LIAB ILITIES Non -current liabilities Interest-bearing liabilities Unsubordinated debentures not in a hedge relationship 18 OFL 1,919 1,919 Leasing and similar obligations 18 OFL 2 2 Other derivatives 33.1 FVTPL Non interest-bearing liabilities Derivatives held-for-hedging 33.1 HeAc 3 3 Other non-current payables 20 OFL Current liabilities Interest-bearing liabilities, current portion Leasing and similar obligations 18 OFL 2 2 Interest-bearing liabilities Other loans 18 OFL Trade payables OFL 1,320 1,320 Other current payables Derivatives held-for-hedging 33.1 HeAc Other derivatives 33.1 FVTPL 2 2 V.A.T. and other amounts payable 21 N/A (1) The categories according to IAS 39 are the following : AFS: Available-for-sale financial assets HTM: Financial assets held-to-maturity LaR: Loans and Receivables financial assets FVTPL: Financial assets/liabilities at fair value through profit and loss OFL: Other financial liabilities Hedge activity HeAc: Hedge accounting 75

245 As of 31 December 2012 (EUR million ) No te Ca teg o ry a cco rd i n g to IAS 39 (1) Ca rryi n g a mo u n t Amounts recognized in balance sheet according to IAS 39 Amo rti zed co s t Acq u i s i ti o n co s t n et o f i mp a i rmen t losses, if any Fa i r va lu e a d ju s tmen t reco g n i zed i n eq u i ty Fa i r va lu e a d ju s tmen t reco g n i zed i n i n co me s ta temen t ASSETS Non -current assets Other participating interests 7 AFS Other non-current assets Other derivatives 33.1 FVTPL Other financial assets 10 LaR Current assets Trade receivables 12 LaR 1,341 1,341 Other current assets VAT and other receivables 13 N/A Investments 14 AFS Investments 14 HTM Cash and cash equivalents Fixed income securities 15 HTM Short-term deposits 15 LaR LIAB ILITIES Non -current liabilities Interest-bearing liabilities Unsubordinated debentures not in a hedge relationship 18 OFL 1,672 1,672 Leasing and similar obligations 18 OFL 2 2 Other derivatives 33.1 FVTPL Non interest-bearing liabilities Other non-current payables 20 OFL 1 1 Current liabilities Interest-bearing liabilities, current portion Unsubordinated debentures not in a hedge relationship 18 OFL Leasing and similar obligations 18 OFL 2 2 Credit institutions 18 OFL 4 4 Interest-bearing liabilities Other loans 18 OFL Trade payables OFL 1,310 1,310 Other current payables Other derivatives 33.1 FVTPL 1 1 V.A.T. and other amounts payable 21 N/A (1) The categories according to IAS 39 are the following : AFS: Available-for-sale financial assets HTM: Financial assets held-to-maturity LaR: Loans and Receivables financial assets FVTPL: Financial assets/liabilities at fair value through profit and loss OFL: Other financial liabilities Hedge activity HeAc: Hedge accounting Note 33.5 Assets and liabilities measured at fair value The Group held as at 31 December 2013 financial instruments measured at fair value. Those instruments are disclosed in the table below according to the valuation technique used. The hierarchy between the techniques reflects the significance of the inputs used in making the measurements: Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities; Level 2: valuation techniques for which all inputs which have a significant effect on the recorded fair value are observable for the asset or liability, either directly or indirectly; Level 3: valuation techniques for which all inputs which have a significant effect on the recorded fair value are not based on observable market data. The Group holds financial instruments classified in Level 1 or 2 only. The valuation techniques for fair value measuring the Level 2 financial instruments are: Other derivatives in Level 2 Other derivatives include mainly the interest rate swaps (IRS) and interest rate and currency swaps (IRCS) the Group entered into to reduce the interest rate and currency fluctuations on some of its long-term debentures. The fair values of these instruments are determined by discounting the expected contractual cash flows using interest rate curves in the corresponding currencies and currency exchange rates, all observable on active markets. Unsubordinated debentures The unsubordinated debentures not in a hedge relationship are recognized at amortized costs. Their fair values, calculated for each debenture separately, were obtained by discounting the interest rates at which the Group could borrow at 31 December 2013 for similar debentures with the same remaining maturities. 76

246 (EUR millio n ) ASSETS No te Level 1 Level 2 Level 3 No n -cu rren t a s s ets Other non-current assets Other derivatives 33.1 FVTPL Cu rren t a s s ets Other current assets Other derivatives 33.1 FVTPL 1 1 Investments 14 AFS LIAB ILITIES No n -current lia bilities Interest-bearing liabilities Unsubordinated debentures not in a hedge relationship (2) 33.1 OFL 1,919 2,093 Other derivatives 33.1 FVTPL Non interest-bearing liabilities Derivatives held-for-hedging 33.1 HeAc 3 3 Current lia bilities Ca teg o ry a cco rd i n g to IAS 39 (1) B a la n ce a t 31 D ecemb er 2013 Non interest-bearing liabilities Derivatives held-for-hedging 33.1 HeAc 2 2 Other derivatives 33.1 FVTPL 2 2 (1) The categories according to IAS 39 are the following : AFS: Available-for-sale financial assets FVTPL: Financial assets/liabilities at fair value through profit and loss (2) The debentures fair values are net of the attached embedded derivatives fair values, which are included in the non-current other derivatives. Fa i r va lu es mea s u remen t a t en d o f the rep o rti n g p eri o d u s i n g : (EUR millio n ) ASSETS No te Level 1 Level 2 Level 3 No n -cu rren t a s s ets Other non-current assets Other derivatives 33.1 FVTPL Cu rren t a s s ets Other current assets Investments 14 AFS LIAB ILITIES Ca teg o ry a cco rd i n g to IAS 39 (1) B a la n ce a t 31 D ecemb er 2012 No n -current lia bilities Interest-bearing liabilities Unsubordinated debentures not in a hedge relationship (2) 33.1 OFL 1,672 1,869 Other derivatives 33.1 FVTPL Current lia bilities Interest-bearing liabilities Unsubordinated debentures not in a hedge relationship 33.1 OFL Credit institutions 33.1 OFL 4 4 Non interest-bearing liabilities Other derivatives 33.1 FVTPL 1 1 (1) The categories according to IAS 39 are the following : AFS: Available-for-sale financial assets FVTPL: Financial assets/liabilities at fair value through profit and loss (2) The debentures fair values are net of the attached embedded derivatives fair values, which are included in the non-current other derivatives. Fa i r va lu es mea s u remen t a t en d o f the rep o rti n g p eri o d u s i n g : 77

247 Note 34. Related party disclosures Note Consolidated companies Subsidiaries, joint-ventures and associates are listed in note 6. Commercial terms and market prices apply for the supply of goods and services between Group companies. The transactions between Belgacom SA and its subsidiaries, being related parties, are eliminated for the preparation of the consolidated financial statements. The transactions between Belgacom SA and its subsidiairies are as follows: B elg a co m SA tra n s a cti o n s wi th i ts s u b s i d i a i ri es Yea r en d ed 31 D ecemb er (EUR mi lli o n ) Revenues Costs of materials and services related to revenue Net finance costs Dividends received Ou ts ta n d i n g b a la n ces o f B elg a co m SA wi th s u b s i d i a ri es As o f 31 D ecemb er (EUR mi lli o n ) Trade receivables Trade payables Interest bearing receivables/liabilities -10,260-10,532 Other receivables and liabilities Associates ClearMedia SA In 2010, the Group acquired 40% of ClearMedia SA but the Group had no significant transactions with this minority participation in 2012 and Joint ventures Belgacom Mobile Wallet SA In November 2013 Belgacom and BNP Paribas Fortis set up Belgacom Mobile Wallet SA a joint venture to support online and mobile trade in Belgium. The company is expected to start its operational activities in Note Relationship with shareholders and other State-controlled entreprises. The Belgian State is the majority shareholder of the Group, with a stake of 53.51%. The Group holds treasury shares for 5.83%. The remaining 40.66% are traded on the First Market of Euronext Brussels. Relationship with the Belgian State The Group supplies telecommunication services to the Belgian State and State-related entities. State related enterprises are those that are either State-controlled or State-jointly-controlled or State-influenced. All such transactions are made within normal customer/supplier relationships on terms and conditions that are not more favorable than those available to other customers and suppliers. The services provided to State-related enterprises do not represent a significant component of the Group s net revenue, meaning less than 5%. 78

248 Note Relationship with key management personnel The remuneration and compensation of the Directors was decided by the General Shareholders Meeting of The principles of this compensation did not change in 2013: it foresees an annual fixed compensation of EUR for the Chairman of the Board of Directors and of EUR for the other members of the Board of Directors, with the exception of the President & CEO. All members of the Board of Directors, with the exception of the President & CEO, have the right to an attendance fee of EUR per attended meeting of the Board of Directors. This fee is doubled for the Chairman. Attendance fees of EUR are foreseen for each member of an advisory committee of the Board of Directors, with the exception of the President & CEO. For the Chairman of the respective advisory committee these attendance fees are doubled. The members also receive EUR per year for communication costs. For the Chairman of the Board of Directors the communication costs are also doubled. The Chairman of the Board of Directors is also Chairman of the Joint Committee and of the Pension Fund. Mrs. Martine Durez and Mr. Theo Dilissen are members of the Board of the Pension Fund. They do not receive any fees for these participations. For the execution of their Board mandates, the Directors do not receive performance-based remuneration such as bonuses or long-term incentive programs, nor do they receive benefits linked to pension plans. The total remuneration for the directors amounts to EUR 1,140,250 for 2013 and EUR 1,118,000 for 2012 The directors have not received any loan or advance from the Group. The number of meetings of the Board of Directors and advising committees are detailed as follows: Board of Directors 8 8 Audit and Compliance Committee 5 8 Nomination and Remuneration Committee 7 6 Strategic and Business Development Committee 2 3 In its meeting of 24 February 2011, the Board adopted a related party transactions policy which governs all transactions or other contractual relationships between the company and its board members. Belgacom has contractual relationships and is also a vendor for telephony, Internet and/or ICT services for many of the companies in which Board members have an executive or non-executive mandate. Belgacom is also a Partner of Guberna, the Belgian Institute for Directors (affiliated with Ms. Lutgart Van den Berghe who is Executive Director of Guberna), for which it has paid a fee of 30,250 in For the year ended 31 December 2012, a total amount of EUR 9,373,347 (social security costs of EUR 1,694,708 and sharebased payments included, as well as long term share-based payments) was paid or granted in aggregate to the members of the Belgacom Management Committee (BMC), Chief Executive Officer included. In 2012, the members of the Belgacom Management Committee were D. Bellens, S. Alcott (6 months), B. Chauvat, M. Georgis, D. Leroy (7 months), G. Standaert (10 months), R. Stewart, and B. Van Den Meersche. For the year ended 31 December 2013, a total amount of EUR 9,762,050 (social security costs of EUR 2,039,278 and sharebased payments included, as well as long term performance value based payments) was paid or granted in aggregate to the members of the Belgacom Management Committee (BMC), Chief Executive Officer included. In 2013, the members of the Belgacom Management Committee were D. Bellens (10,5 months), B. Chauvat (12 months), M. Georgis, D. Leroy, G. Standaert, R. Stewart, and B. Van Den Meersche. These total amounts of key management compensation include the following components: Short-term employee benefits: annual salary (base and short-term variable) as well as other short-term employee benefits such as medical insurance, private use of management cars, meal vouchers, and including employer social security contributions paid on these benefits; Post-employment benefits: insurance premiums paid by the Group in the name of members of the BMC. The premiums cover mainly a post-retirement complementary pension plan; Share-based payments: Cost of the discount of 16.66% compared to the market price in Discounted Share Purchase Plan and, only for 2012, also the fair value of stock options (that is expensed over the vesting period in accordance with the graded vesting method); Performance Value based payments (long term): gross amounts, granted under Performance Value, which create possible exercising rights as from May 2016, depending on the achievement of market conditions based on Belgacom s Total Shareholder Return compared to a predefined group of other European telecom operators. Possible exercising will happen in cash, which implies that employer social contributions have been taken into account. Only as from 2013 as replacing the former Stock Options Plan; Termination benefits: paid or accrued 79

249 Yea r en d ed 31 D ecemb er EUR Short-term employee benefits 6,921,826 6,700,283 Post-employment benefits 710, ,392 Share- based payments 1,740,981 2,133,375 To ta l 9,373,347 9,76 2,05 0 Yea r en d ed 31 D ecemb er Shares (Discounted Share Purchase Plan) 138, ,935 Options (Stock Option Plan) 310,924 0 Note Regulations The telecommunications sector is regulated through the legislation adopted in the Belgian parliament, through a series of Royal and Ministerial Decrees, and also through decisions of the Belgian Institute for Postal services and Telecommunications, commonly referred to as the BIPT/IBPT. The Belgian licensing regime provides for individual licenses for the provision of public fixed voice telephony services, public network infrastructure services and mobile telecommunications services. The company is also governed by certain provisions and principles of Belgian public and administrative law whereby Belgacom has obligations such as the delivery of regulated services and public services. Note 35. Rights, commitments and contingent liabilities Operating lease commitments The Group rents sites for its telecom infrastructure and leases buildings, technical and network equipment, as well as furniture and vehicles under operating leases with terms of one year or more. Rental expenses in respect of these operating leases amounted EUR 124 million in 2013 and EUR 127 million in Future minimum rentals payable under the non-cancellable operating leases are as follows at 31 December 2013: Wi thi n o n e Fro m 1 to 3 Fro m 3 to 5 Mo re tha n 5 (EUR mi lli o n ) yea r yea rs yea rs yea rs To ta l Buildings Sites Technical and network equipment Vehicles Other material To ta l Future minimum rentals payable under the non-cancellable operating leases are as follows at 31 December 2012: Wi thi n o n e Fro m 1 to 3 Fro m 3 to 5 Mo re tha n 5 (EUR mi lli o n ) yea r yea rs yea rs yea rs To ta l Buildings Sites Technical and network equipment Vehicles Other material To ta l In the scope of its normal activities, the Group rents the equipment for its own use and needs. The Group is therefore not involved in significant sublease contratcs with customers. The rent contracts do not include contingent rent payable or other special features or restrictions. 80

250 Claims and legal proceedings From time to time, Belgacom has been subject to legal, regulatory and tax proceedings and claims arising in the ordinary course of its business. Belgacom is currently involved in various judicial and regulatory proceedings, including those for which a provision has been made and those described below for which no or limited provisions have been accrued, in the jurisdictions in which it operates concerning matters arising in connection with the conduct of its business. These include also proceedings before the Belgian Institute for Postal services and Telecommunications ("BIPT"), appeals against decisions taken by the BIPT, and proceedings with the Belgian tax administrations with respect to real estate withholding taxes and corporate income taxes. 1. After the launch on 1 June 2005 of the Happy Time tariff scheme by Belgacom, Tele2 filed a complaint with the Belgian Competition Authority i) alleging that said tariffs constitute an abuse of dominant position (27 June 2005) and ii) requesting interim measures, i.e. suspension of the Happy Time offer, pending the procedure (5 July 2005). On 1 September 2006, Tele2 s request for interim measures was initially rejected by the President of the Competition Council. Following an appeal by Tele2, the Court of Appeal, on 18 December 2007, annulled the aforementioned decision, arguing amongst other lack of reasoning. However, Tele2 did not ask the President to adopt a new decision on its request for interim measures but (i) initiated on 18 April 2008 a damage claim before the Commercial Court based on an alleged abuse of dominance (the Happy Time plan) (claim for EUR 1 provisional and request for appointment of an expert to compute the precise damage) and (ii) requested the proceedings in front of the Competition Authority on the merits to be dealt with. It is to be noted that given different reorganizations within the KPN Group, KPN Belgium became the claimant in the aforementioned case. On 29 November 2012, two decisions regarding Belgacom's Happy Time offer were adopted. Through a decision on the merits of the case, the Competition Council concluded that there are no grounds for actions against Belgacom for its Happy Time offer. This ruling follows the complaint lodged in 2005 by Tele2 arguing that such tariff amounted to a price squeeze. After having performed four different margin squeeze tests for the period , the Competition Council decided not to follow the Statement of Objections of the College of Competition Prosecutors issued in September 2009 that concluded that Belgacom abused and was still abusing its dominant position. The Competition Council has now indicated that none of the tests that it performed has led to the conclusion that a margin squeeze existed or has existed. The Competition Authority therefore closed the case. On 4th February 2013, KPN lodged an appeal before the Court of Appeal. In the damage claim case before the Commercial Court, based on an alleged abuse of dominance, the Commercial Court issued an interim ruling. It stated that it did not see evidence of an infringement but nevertheless appointed an expert to carry out further verifications on price squeeze and predatory pricing. In the meantime, this expert has refused the task entrusted to him by the Commercial Court so that a new expert should be appointed. 2. Between 12 and 14 October 2010, the Belgian Directorate General of Competition started a dawn raid in Belgacom s offices in Brussels. This investigation concerns allegations by Mobistar and KPN regarding the wholesale DSL services of which Belgacom would have engaged in obstruction practices. This measure is without prejudice to the final outcome of the full investigation. Following the inspection, the Directorate General of Competition is to examine all the relevant elements of the case. Eventually the College of Competition Prosecutors may propose a decision to be adopted by the Competition Council. During this procedure, Belgacom will be in a position to make its views heard. (This procedure may last several years.) During the investigation of October 2010, a large numbers of documents were seized (electronic data such as a full copy of mail boxes and archives and other files). Belgacom and the prosecutor of the Competition authority exchanged extensive views on the way to handle the seized data. Belgacom wanted to be sure that the lawyers legal privilege (LPP) and the confidentiality of in house counsel advices are guaranteed. Moreover, Belgacom sought to prevent the Competition authority from having access to (sensitive) data that were out of scope. Not being able to convince the prosecutor of its position, Belgacom started two proceedings, one before the Brussels Court of Appeal and one before the President of the Competition Council, in order to have the communication of LPP data and data out of scope to the investigation teams suspended. On 5 March 2013, the Court of Appeal issued a positive judgment in this appeal procedure by which it ruled that investigators had no authority to seize documents containing advices of company lawyers and documents that are out of scope and that these documents should be removed/destroyed. To be noted that this is a decision on the procedure in itself and not on the merit of the case. On 14 October 2013, the Competition authority launched a request for cassation against this decision. Belgacom has joined this cassation procedure 3. In June 2003, KPN Group Belgium (operating under the brand name BASE) filed an action for damages against Belgacom (former Belgacom Mobile operating under the brand name Proximus) before the Commercial Court of Brussels, with Mobistar joining this action with an own claim in March KPN and Mobistar claimed that Belgacom had abused its dominant position by applying inappropriately low prices for on-net calls (calls from Proximus to Proximus) with KPN also claiming that Belgacom had applied mobile termination rates (MTR) that were too high. Both operators claimed for compensation. 81

251 On 29 May 2007, an interim decision of the Commercial Court of Brussels found Belgacom to be dominant between 1999 and 2004, rejected several claims and appointed two experts to examine questions related to the allegations concerning price squeeze and anti-competitive network effects, and to assess whether damage was caused, and -if so- to attempt evaluating the damage. On 2 October 2009, these experts filed a (first) preliminary report that concluded to the existence of the alleged competition law infringements and in particular, on the basis of an unprecedented and prospective method, that it could be considered that the alleged impact on Mobistar and KPN Group Belgium of the Proximus on-net tariffs during the years amounted to EUR1.182 million. On 10 December 2010, the two experts filed another (second) preliminary report. Notwithstanding the detailed critical observations that had been submitted to the experts by Belgacom on all aspects of their first report, this second report basically reiterated the findings of the first report, but found the alleged impact amounted to EUR million. According to Belgacom, this second report did not provide any demonstration of the alleged infringements of the competition rules. Belgacom also noted that the vast majority of its observations remained unanswered and that moreover Belgacom s own expert reports were largely disregarded. For this and a number of other reasons, Belgacom introduced on 21 January 2011 a motion with the Commercial Court in respect of the expert panel, requesting their recusal/replacement. Following the dismissal by the Commercial Court on 17 March 2011 of Belgacom s motion, an appeal procedure was initiated by Belgacom. The Court of Appeal decided on 6 March 2012 that the experts indeed committed several errors, refrained systematically from replying appropriately to Belgacom s observations, thus affecting the rights of defence, and failed to respect several other principles governing judicial expert proceedings. The Court consequently decided that the experts had to be replaced and that the judicial expert proceedings should be restarted by new experts. Upon a joint proposal by the parties, the Court of Appeal of Brussels appointed on 1 October 2012 such new experts. Both Mobistar and KPN Group Belgium continue to contest the replacement of the former court experts through actions with the Cour de cassation. These former court experts also started a procedure ("tierce opposition") against the judgment of 6 March 2012 replacing them. On 31 December 2012, the newly appointed court experts informed the Court of Appeal and the Commercial Court of their decision that, for various reasons, they would not pursue their assignment. On 14 October 2013, the Cassation Court rejected the appeal of Mobistar and KPN Group Belgium. Following to this ruling, Mobistar and KPN Group Belgium relaunched the designation procedure, which led to a joint proposal of all the parties to designate two new experts. The latter s still have however to indicate if they accept the mission. In the meantime, Belgacom lodged an appeal against the initial decision of 29 May 2007 of the Commercial Court and this was followed by the filing of cross-appeals against the said judgment by both KPN and Mobistar. The Court will ultimately need to determine (i) whether anti-competitive practices have been committed and whether Belgacom s MTR failed to respect its regulatory obligations, (ii) whether Belgacom is liable for such practices, and (iii) whether damages are to be paid and -if so- the amount of these possible damages. Belgacom will continue to submit at the required stages of the proceedings its detailed observations and criticisms that will cover all aspects of the pending matter. Indeed, this matter does not only involve a debate on the possible damages that would have been caused, but first the existence of the alleged infringements is to be demonstrated. Belgacom continues to contest the claims of both KPN Group Belgium and Mobistar. In October 2009, seven parties (Telenet, KPN Group Belgium (former Base), KPN Belgium Business (Tele 2 Belgium), KPN BV (Sympac), BT, Verizon, Colt Telecom) filed an action against Belgacom Mobile (currently Belgacom and hereinafter indicated as Belgacom) before the Commercial Court of Brussels formulating allegations that are similar to those in the case mentioned above (including Proximus-to-Proximus tariffs constitute an abuse of Belgacom s alleged dominant position in the Belgian market), but for different periods depending on the claimant, in particular, in the 1999 up to now timeframe (claim for EUR 1 provisional and request for appointment of an expert to compute the precise damage). In November 2009 Mobistar filed another similar claim for the period 2004 and beyond. These cases have been postponed for an undefined period. 4. In the proceedings following a complaint by KPN Group Belgium in 2005 with the Belgian Competition Authority the latter confirmed on 26 May 2009 one of the five charges of abuse of dominant position put forward by the Prosecutor on 22 April 2008, i.e. engaging in in a price-squeeze on the professional market. The Belgian Competition Authority considered that the rates for calls between Proximus customers ( on-net rates ) were lower than the rates it charged competitors for routing a call from their own networks to that of Proximus (=termination rates), increased with a number of other costs deemed relevant. All other charges of the Prosecutor were rejected. The Competition Authority also imposed a fine of EUR 66.3 million on Belgacom (former Belgacom Mobile) for abuse of a dominant position during the years 2004 and Belgacom was obliged to pay the fine prior to 30 June 2009 and recognized this charge (net of existing provisions) as a non-recurring expense in the income statement of the second quarter Belgacom filed an appeal against the ruling of the Competition Authority with the Court of Appeal of Brussels, contesting a large number of elements of the ruling: amongst other the fact that the market impact was not examined. Also KPN Group Belgium and Mobistar filed an appeal against said ruling. The parties are exchanging briefs to organize the access to the file. 82

252 5. The Belgian tax authorities notified a foreign subsidiary of the Group in 2007 to be considered as a tax resident of Belgium rather than of Luxembourg and therefore to be subject to Belgian corporate income tax for the year In 2008, the Belgian tax authorities maintained their 2004 assessment and assessed the Belgian corporate income tax for the subsequent years 2005 and Belgacom has strong arguments to ward off the cumulative proposed tax assessment of EUR 69 million (years 2004, 2005 and 2006 together) excluding interests and has started legal proceedings before Court. Since 2003, Belgacom considers some enrolments of real estate tax on telecom equipment as undue and therefore recognizes an asset against the tax authorities in the current tax assets caption for an amount of EUR 120 million at 31 December 2013 (with a related liability of EUR 28 million). Capital expenditure commitments At 31 December 2013, the Group has contracted commitments of EUR 77 million, mainly for the acquisition of intangible assets and technical and network equipment. Other rights and commitments At 31 December 2013, the Group has the following other rights and commitments: The Group received guarantees for EUR 9 million from its customers to guarantee the payment of its trade receivables and guarantees for EUR 9 million from its suppliers to ensure the completion of contracts or works ordered by the Group; The Group granted guarantees for an amount of EUR 52 million (including the bank guarantees mentioned in note 33.2) to its customers and other third parties to guarantee, among others, the completion of contracts and works ordered by its clients and the payment of rental expenses related to buildings and sites for antennas installation; Belgacom has a right, established by Belgian legislation with respect to Universal Services, to receive a compensation for offering Social Tariffs as from July 1st, This right was contested by some operators and the European Commission brought Belgium before the European Court for this Belgian legislation. Begin October 2010, the European Court has passed judgement and in January 2011, the Constitutional Court has annulled certain provisions of the Belgian law. On 29 June 2012 a new law was voted to comply with the European legislation. No results concerning the application of this new law are available at 31 December On 29 December 2013 the Constitutional Court has confirmed the possibility of the retroactivity of the financing since However, the I.B.P.T. still has to decide if there is a net cost and an unsupportable burden per operator. 83

253 Note 36. Share-based Payment Discounted Share Purchase Plans In 2012 and 2013, the Group launched Discounted Share Purchase Plans. Under the 2012 and 2013 plans, Belgacom sold respectively 208,433 and 219,935 shares to the senior management of the Group at a discount of 16.66% compared to the market price (discounted price of respectively EUR per share and EUR 14.51). The cost of the discount amounted to EUR 0.6 million in 2012 and EUR 0.7 million in 2013 and was recorded in the income statement as personnel expenses (see note 26). Performance Value Plan In 2013, Belgacom launched a new Performance Value Plan for its senior management. Under this Long-Term Performance Value Plan, the granted awards are conditional upon a blocked period of 3 years after which the Performance Values vests. The possible exercising rights are dependent on the achievement of market conditions based on Belgacom s Total Shareholder Return compared to a group of peer companies. After the vesting period rights can be exercised during four years. The settlement method in equity or cash is defined at grant date. In case of voluntary leave during the vesting period, all the non-vested rights and the vested rights not exercised are forfeited. In case of involuntary leave or retirement, except for serious cause, the rights continue to vest during the normal 3 year vesting period. The group determines the fair value of the arrangement at inception date and the cost is linearly spread over the vesting period with corresponding increase in equity for equity settled and liability for cash settled shared based payments. For cash settled share-based payment the liability is periodically re-measured. The initial fair value amounts to EUR 5.9 million for the 2013 tranche. The calculation of simulated total shareholder return under the Monte Carlo model for the remaining time in the performance period for awards with market conditions included the following assumptions as of April 30th and December 31, 2013: Weighted average risk free of return Expected volatility - company Expected volatility - peer companies Weighted average remaining measurement period As o f 30 April 31 December % 0.60% 23% 24% 15% - 62% 15% - 58% 3.0 2,5 Employee Stock Option Plans In 2012, Belgacom launched a last yearly tranche of the Employee Stock Option Plan whereby 840,732 share options were granted to the key management and senior management of the Group. The Plan rules were adapted early 2011 according to the Belgian legislation. Therefore as from 2011, the Group launched two different series: one for the Belgacom Management Committee (BMC), Chief Executive Officer included (298,259 share options in the 2012 tranche) and one for the other key management and senior management (542,473 share options in the 2012 tranche). As prescribed by IFRS 2 ( Share-based Payments ), the Group recognizes the fair value of the equity portion of the share options at inception date over their vesting period in accordance with the graded vesting method and periodic remeasurement of the liability component. Black&Scholes is used as option pricing model. Such fair value amounted to EUR 2.5 million for the 2012 tranche. The annual charge of the graded vesting including the liability component re-measurement is recognized as personnel expenses and amounts to EUR 8.7 million in 2012 and EUR 4.5 million in At the moment of exercise, the employee will pay the exercise price of EUR for the 2012 tranche, with physical delivery of the share. The share options are exercisable 13 May 2019 for the 2012 tranche at the latest. The tranches granted in 2004, 2005, 2006, 2007, 2008, 2009, 2010, 2011 and 2012 are still open. All the tranches except the 2004 tranche provide the beneficiaries with a right to the dividends declared after granting the options. The dividend liability amounted to EUR 17 million on 31 December 2012 and EUR 11 million on 31 December 2013 and is included under the caption Other current payables. The right to dividends granted to the beneficiaries of the tranches is not limited in time and corresponds to the contractual life of the tranches. 84

254 In 2009, the Group gave the opportunity to its option holders to voluntary extend the exercise period of all the former tranches (except the 2009 tranche) with 5 years, within the guidelines as established by the law. For all the tranches except the 2004 tranche and the BMC series of 2011 and 2012 tranches (as described below), in case of voluntary leave of the employee, all unvested options forfeit except during the first year, for which the first third of the options vests immediately and must be exercised prior to the second anniversary following the termination date of the contract, as for all vested options; in case of involuntary leave of the employee, except for serious cause, all unvested options vest immediately and must be exercised prior to the second anniversary following the termination date of the contract or prior to the expiration date of the options whichever comes first, as for all vested options; in case of involuntary leave of the employee for serious cause, all options forfeit immediately. For the BMC serie of the 2011 and 2012 tranches: in case of voluntary leave of the BMC member during a period of three year following the grant 50% of the options immediately forfeit. If the voluntary leave takes place after that date, the options continue to vest according to the plan rules and regular vesting calendar. The exercise may only take place at the earliest on the first business day following the 3rd anniversary of the offer date. The exercise should take place prior to the 5th anniversary following the termination of the contract or prior to the expiration date of the options, whichever comes first, otherwise the options become forfeited; in case of involuntary leave of the BMC member, except for serous cause, the options will continue to vest according to the plan rules and regular vesting calendar. The exercise may only take place at the earliest on the first business day following the 3rd anniversary of the offer date. The exercise should take place prior to the 5th anniversary following the termination of the contract or the expiration date of the options, whichever comes first, otherwise the options become forfeited; In case of involuntary leave of the BMC member for serious cause, all options forfeit immediately. The evolution of the stock option plans is as follows: Nu mb er o f s to ck o p ti o n s The volatility has been estimated based on the actual trading statistics of the share and taking into account alignment to certain peers, comparable in terms of risk profile (volatility: 28%). Note 37. Relationship with the auditors Outs ta nding a t 31 December ,359 54,130 95, , , , ,116 1,002, ,732 Exercis a ble a t 31 December ,359 54,130 95, , , , , ,879 5,000 Movements during the year 2013 Granted 0 Forfeited 0 0-1,332-48,257-98,723-23, , , ,414 Exercised 0-12,812-50, , ,963-1,650-2,257-2,026 Expired Total 0-12,812-51,948-48, , , , , ,440 Outs ta nding a t 31 December ,359 41,318 44, , , , , , ,292 Exercis a ble a t 31 December ,359 41,318 44, , , , , , ,802 Exercis e price The Group expensed for the Group s auditors during the year 2013 an amount of EUR 1,266,590 for the annual audit mandate fees and EUR 251,595 for non-mandate fees. This last amount is detailed as follows: EUR Aud i to r Netwo rk o f a ud i to r Other mandatory audit missions 35,940 0 Tax advice 0 13,420 Other missions 87, ,193 To ta l 122, ,

255 Note 38. Segment reporting As from 1 January 2008 onwards, the Board of Directors, the Chief Executive Officer and the Belgacom Management Committee managed the operations of Belgacom Group based on the new client-oriented organization structured around the five following reportable operating segments: The Consumer Business Unit (CBU) sells voice products and services, internet and television, both on fixed and mobile networks, to residential clients, mainly on the Belgian market; The Enterprise Business Unit (EBU) sells ICT services and products to professional clients, whether they are independent workers, smaller firms or major companies. These ICT solutions, including telephone services, are marketed mainly under the Belgacom, Proximus and Telindus brands, on both the Belgian and international markets; The Service Delivery Engine & Wholesale (SDE&W) centralizes all the network and IT services and costs (excluding costs related to customer operations and to the service delivery of ICT solutions), provides services to CBU and EBU and sells these services to other telecom and cable operators; International Carrier Services (ICS) is responsible for international carrier activities; Staff and Support (S&S) brings together all the horizontal functions (human resources, finance, legal, strategy and corporate communication), internal services and real estate supporting the Group s activities. No operating segments have been aggregated to form the above reportable operating segments. The Group monitored the operating results of its reportable operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance was evaluated on the following basis: The operating income before depreciation and amortization and before non-recurring income and expenses; and The capital expenditures. Group financing (including finance expenses and finance income) and income taxes were managed on a group basis and are not allocated to operating segments. The accounting policies of the operating segments are the same as the significant accounting policies of the Group. Segment results are therefore measured on a similar basis as the operating result in the consolidated financial statements. Intercompany transactions between legal entities of the Group are invoiced on an arm s length basis. (EUR mi lli o n ) Co n s u mer B u s i n es s Un i t Enterp ri s e B u s i n es s Un i t Year ended 31 December 2013 Sta ff & Sup p o rt Servi ce D eli very Eng i n e & Who les a le In tern a ti o n a l Ca rri er Servi ces In ters eg men t eli mi n a ti o n s To ta l Net revenue 2,201 2, , ,239 Other operating income Intersegment income TOTAL SEGMENT INCOME 2,226 2, , ,318 Costs of materials and services related to revenue , ,561 Personnel expenses and pensions ,142 Other operating expenses TOTAL OPERATING EXPENSES before depreciation & amortization -1,255-1, , ,605 TOTAL SEGMENT RESULT (1) 971 1, ,713 Non-recurring expenses OPERATING INCOME / (LOSS) before depreciation & amortization 954 1, ,699 Depreciation and amortization OPERATING INCOME / (LOSS) 799 1, Net finance costs -96 INCOME BEFORE TAXES 822 Tax expense -170 NET INCOME 652 Non-controlling interests 22 Net income (Group share) 6 30 (1) Operating income before depreciation and amortization and before non-recurring income and expenses (EUR mi lli o n ) Co n s u mer B u s i n es s Un i t Enterp ri s e B u s i n es s Un i t Year ended 31 December 2013 Sta ff & Sup p o rt Servi ce D eli very Eng i n e & Who les a le In tern a ti o n a l Ca rri er Servi ces In ters eg men t eli mi n a ti o n s To ta l Capital expenditure

256 (EUR mi lli o n ) Co n s u mer B u s i n es s Un i t Enterp ri s e B u s i n es s Un i t Year ended 31 December restated Servi ce D eli very Eng i n e & Who les a le Sta ff & Sup p o rt In tern a ti o n a l Ca rri er Servi ces In ters eg men t eli mi n a ti o n s To ta l Net revenue 2,298 2, , ,415 Other operating income Intersegment income TOTAL SEGMENT INCOME 2,321 2, , ,462 Costs of materials and services related to revenue , ,611 Personnel expenses and pensions ,126 Other operating expenses TOTAL OPERATING EXPENSES before depreciation & amortization -1,330-1, , ,661 TOTAL SEGMENT RESULT (1) 991 1, ,801 Non-recurring expenses OPERATING INCOME / (LOSS) before depreciation & amortization 991 1, ,786 Depreciation and amortization OPERATING INCOME / (LOSS) 852 1, ,038 Net finance costs -131 INCOME BEFORE TAXES 907 Tax expense -177 NET INCOME 730 Non-controlling interests 19 Net income (Group share) 712 (1) Operating income before depreciation and amortization and before non-recurring income and expenses (EUR mi lli o n ) Co n s u mer B u s i n es s Un i t Enterp ri s e B u s i n es s Un i t Year ended 31 December 2012 Sta ff & Sup p o rt Servi ce D eli very Eng i n e & Who les a le In tern a ti o n a l Ca rri er Servi ces In ters eg men t eli mi n a ti o n s To ta l Capital expenditure In respect of geographical areas, the Group realized EUR 4,236 million net revenue in Belgium in 2012 and EUR 4,011 million in 2013 based on the country of the customer. The net revenue realized in other countries amounted to EUR 2,179 million in 2012 and EUR 2,227 million in More than 90% of the segment assets are located in Belgium. Note 39. Recent IFRS pronouncements The Group does not early adopt the standards or interpretations that are not yet effective at 31 December This means that the Group did not apply the following standards or interpretations that are applicable for the Group as from 1 January 2014 or later: Annual Improvements to IFRS s ( cycle) and ( cycle); Amendments to standards: o o o o o Amendments to IAS 27 ( Separate Financial Statements ) and IAS 28 ( Investments in Associates and Joint Ventures ); Amendments to IAS 32 ( Offsetting Financial Assets and Liabilities ); Amendment to IAS 39 ( Novation of Derivatives and Continuation of Hedge Accounting ); Amendment to IAS 19 ( Employee Benefits Employee Contributions ); Amendment to IAS 36 ( Impairment of Assets Recoverable Amount Disclosures for Non-Financial Assets ). Newly issued standards: o o o o o IFRS 9 ( Financial Instruments ), IFRS 10 ( Consolidated Financial Statements ) that supersedes part of IAS 27 ( Separate Financial Statements ) and SIC-12 ( Consolidated Special Purpose Entities ), IFRS 11 ( Joint Arrangements ) that supersedes part of IAS 31 ( Interests in Joint Ventures ) and SIC-13 ( Jointly Controlled Entities Non Monetary Contributions by Venturers ), IFRS 12 ( Disclosure of Interests in Other Entities ), IFRIC Interpretation 21 ( Levies ) The Group will investigate the possible impacts of the application of these new standards and interpretations on the Group s financial statements in the course of The Group does not anticipate material impacts from the initial application of IFRS The application of IFRS 12 will result in more extensive disclosures in the consolidated financial statement and applies to interests in subsidiaries, joint arrangements and associates. Note 40. Post balance sheet events Belgacom has entered into exclusive negotiations with Vivendi with respect to the sale of its fully owned subsidiary Groupe Telindus France. Completion of the transaction is subject to the satisfaction of certain conditions precedent among which approval by the French Competition Authorities. 87

257 AUDITOR S REPORT 88